Chicago Schools Now Paying 9% on Adjustable Rate Bonds
- Distict pays penalty yields after choosing not to remarket
- Rising variable-rate debt costs recall 2008 credit crisis
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Chicago’s school system is paying bond-market penalties similar to those seen during last decade’s credit crisis.
The junk-rated district, reeling from escalating pension costs and fallout from the Illinois budget gridlock, has been stuck paying punitive interest rates on $167.5 million of adjustable-rate bonds after choosing not to attempt to remarket the bonds. The rate on the bonds, which are supposed to stay extremely low because investors can resell them to banks periodically, jumped to a maximum 9 percent on March 1 from 4.64 percent the week before and has stayed there ever since, according to data compiled by Bloomberg.