Friday, December 8, 2017

Illinois Attempting To Kick The Can Down The Road A Little Further with Goldman Sachs' Help

Illinois, a junk rated credit risk, has just issued new bonds at Triple-A grade employing a "smoke and mirror" technique that give new bondholders first claim on sales tax revenue (see chart). Goldman's jiggering of the books, a trick that solves nothing in bankruptcy, should put outstanding Illinois bond holders into a subordinated position, thus, making them worth less. Cash-strapped states will be eagerly watching to see if the smoke and mirrors lures in fresh money and kicks the can down the road a little further.


Headline: How Cash-Strapped Chicago Snagged a Triple-A Rating for Its New Bonds

Chicago is running a multimillion-dollar deficit and faces a pension-funding crisis that dwarfs many others around the country.

Yet the nation’s third-largest city is on the verge of selling as much as $3 billion in bonds at a triple-A rating, the latest twist in the tale of cash-strapped U.S. municipalities adopting Wall Street financial engineering in their struggle to raise money in the market.




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