Bond-rating firm hits state for pension inactionContinue reading.
‘Unsettled’ market prompts state to pull plug on $500 million bond issue
SPRINGFIELD-Gov. Pat Quinn’s administration abruptly put the brakes on a $500 million bond issue scheduled Wednesday because of an “unsettled” market it attributed to last week’s bond-rating downgrade for the state.
“Our conversations with potential bidders lead us to believe the market is unsettled because of recent actions and comments by the bond rating agencies,” Abdon Pallasch, Quinn’s assistant budget director, said in a prepared statement.
“We plan to schedule a new bond sale after the markets have had time to digest the news,” he said.
The move comes after Standard & Poor’s rated Illinois’ bonds at A- with a negative outlook, a standing that propelled Illinois below California as the least credit-worthy state in the country.
The money was to have been used for state road, school and other construction projects.
Standard & Poors justified its action because of inertia on pension reform during the lame-duck legislative session earlier this month and pessimism that nothing will happen on the issue in the foreseeable future.
Standard & Poor’s action followed a similar negative move by Fitch three days after lawmakers concluded their lame-duck session without a pension deal. Fitch placed its “A” rating on $26.2 billion in outstanding state debt on a “negative” outlook.
“The administration’s decision to pull the $500 million bond sale today is a clear indication that officials were concerned that we might pay too much in interest, in large part due to our awful credit rating,” House Minority Leader Tom Cross (R-Oswego) said in a prepared statement.
“Our failure to pass meaningful pension reform, to pay down our large backlog of bills and to live within our means is contributing to this uncertainty in the markets for us,” Cross said.