Hard pass – Chicago is trying to sell $1.2 billion of bonds. Who wants them?

Chicago bond shops helping hawk the city’s big $1.2 billion offering stand to earn lucrative fees, but they’ll have to work hard for the money.

It’s the city’s largest bond sale since 2017 and perhaps the largest ever in terms of the $3.2 million in fees earmarked for minority-owned underwriters, including Chicago-based Loop Capital Markets and Cabrera Capital Markets.

The underwriters, led by New York giant Goldman Sachs, are racing to get Chicago the best price they can on the bonds in a sales process that was expected to wrap up as early as this month but is now likely to stretch into next year. It’s no small matter for the cash-strapped city, which can use every penny to fund its new budget. Mayor Lori Lightfoot and the city’s bankers are trying to persuade buyers to pay up for the new bonds despite the city’s precarious finances and mixed bond agency reviews.

“I really, really don’t think that the delay has anything to do with the market not being there for Chicago,” says John Miller, head of municipals in Chicago at big bond investment firm Nuveen. “We can use Chicago bonds at today’s market price,” he says of the firm’s interest, while declining to be explicit about how many bonds it may want and at what price.

Lightfoot’s administration is pursuing the bond sale to refinance part of the city’s outstanding $10.7 billion in general obligation and sales tax-backed bonds and lower its interest expense by $200 million. “Instead of looking to one-time measures of the past, we are focused on prudent measures for addressing outstanding debt that will achieve significant near-term savings to the taxpayer without sacrificing the long-term financial health of the city,” Chicago Chief Financial Officer Jennie Bennett said in an October statement.

The “negotiated” sale, as opposed to a competitive auction, means underwriters survey potential buyers before huddling to determine the right price. Just hours before the sale, the underwriters will post a price, but for now both sides are angling for the upper hand.

“It’s still competitive pricing because if we don’t get a good price for the city, they’re not going to use any of us,” says Martin Cabrera, founder and CEO of Cabrera Capital Markets, a Hispanic-owned firm. He, too, refrained from discussing details.

Cabrera Capital is expected to be among the highest earners, landing $750,000 from the deal, like banks Goldman and JPMorgan Chase, as well as minority-owned firm Siebert Williams Shank, according to a document the city shared with City Council Finance Committee members. Loop Capital, led by CEO Jim Reynolds, and Chicago-based Melvin Securities, both African American-owned, each will earn $340,000, according to the document specifying fees for 12 firms.

www.chicagobusiness.com/finance-banking/chicago-trying-sell-12-billion-bonds-who-wants-them