Chicago to sell $1.2 billion O'Hare bonds

Chicago's O'Hare International Airport will sell $1.17 billion of tax-exempt and Build America bonds in the biggest municipal sale in three weeks as issuance recovers from the slowest week of the year.

Chicago's offering will help fund the $3.28 billion phase one of the O'Hare Modernization Project, according to Standard & Poor's. The airport was the world's fourth-largest by passenger traffic last year. The sale includes $127.3 million of securities backed by passenger facility fees, which S&P downgraded to A-, its fourth-lowest investment grade, from A on March 31.

The city last sold bonds on behalf of O'Hare in January 2008. An uninsured security from that sale maturing in 2038 had an average yield of 4.65 percent on April 7, according to Municipal Securities Rulemaking Board, up one basis point from 4.64 percent when it was sold more than two years ago. Top-rated 30-year tax-exempt debt has lost 21 basis points since the beginning of 2008, according to Municipal Market Advisors.

"It's a major hub and it's a major economic engine and there's a lot of interest in the deal," said Tom Boylen, a managing director and municipal-bond trader in Chicago at BMO Capital Markets, a co-manager. "With a nominal back-up in yields, I think you're going to have a nice basis for this deal."

Yields on top-rated, 10-year tax-exempts rose 2 basis points on April 9, erasing a drop from the previous day that was the index's first decline since March 10, according to a daily survey by Concord, Massachusetts-based MMA. The yield touched 3.3 percent last week, the highest since July. Municipal bonds have plunged in the past two weeks on signs of quickening U.S. economic recovery.