New CPS construction bonds may be A-OK

Who'd have thought the financially strapped Chicago Public Schools could get an A-rated bond these days?

It happened Thursday.

Fitch gave a proposed bond issue an A rating with a stable outlook - that's eight steps above the junk rating of B-plus with a negative outlook that the ratings agency has assigned to the $6.8 billion in CPS' general obligation debt. The Kroll Bond Rating Agency Inc. also rated the bonds at BBB, deeming them of "medium quality."

CPS accomplished the feat in two ways: First by proposing the sale of a half-billion dollars in capital bonds tied to a special property tax, and second, by raising the specter of a "hypothetical bankruptcy" in its bond offering to assuage investor fears about the cash-strapped district's financial risk.

Last February, CPS had to pay a whole lot more to borrow less than planned after Gov. Bruce Rauner raised the possibility of forcing the state's largest district into bankruptcy.

State law doesn't permit school districts to declare bankruptcy nor is that likely to change anytime soon so long as the General Assembly remains in Democratic hands. But borrowing costs jumped right after the governor's mention of the b-word.

CPS is now preparing to sell $500 million in bonds toward nearly a billion's worth of capital improvements, and keep its costs of borrowing as low as possible. Officials plan to speak with potential investors next week.

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