Holley & Pearson-Farrer LLP was recognized for its role as lead disclosure counsel to the City of Chicago in connection with The Bond Buyer’s 2023 Deal of the Year. Our firm advised in connection with a $740.5 million bond issuance of sales tax securitization bonds by the City of Chicago’s special purpose, bankruptcy-remote entity, the Sales Tax Securitization Corporation.
This ambitious plan of finance included Chicago’s first social-designated bonds, which funded Chicago’s environmental, social, and governmental (ESG) initiatives, particularly the Chicago Recovery Plan, Chicago’s equity-based investment strategy to support a sustainable, equitable economic recovery from the COVID-19 pandemic. The $160 million in social bonds financed initiatives related to affordable housing, homelessness support services, environmental justice, community development, and other urban social goals. The social designation also included a voluntary reporting component, in which the City of Chicago agreed to track and report the use of bond proceeds and the outcomes relating to the Chicago Recovery Plan projects.
Notably, the social bonds were offered to individual investors one day before being marketed to institutional investors, providing an opportunity for Chicago residents to become stakeholders in their neighborhoods. As a result, 8% of the social bonds were sold to Chicago residents and 24% were purchased by Illinois investors. The social designation allowed investors to invest directly in bonds that finance socially beneficial programs. Consequently, 11 ESG-focused investment funds acquired a total of $88 million of the social bonds.
The financing was also unique in including a cross-credit refunding tender. Bond proceeds were used to finance the repurchase by means of a tender offer of outstanding general obligation bonds of the City of Chicago, in addition to a direct refunding. This novel structure allowed the City of Chicago to refund and retire some of its higher-interest-rate debt obligations. The financing included three tax-exempt series and two taxable series. The social bonds were senior bonds, and the remainder were subordinate obligations.
This multilayered transaction was selected by The Bond Buyer as the 2023 Deal of the Year for the Midwest region and subsequently as the 2023 national Deal of the Year. The Bond Buyer’s annual Deal of the Year awards recognize outstanding achievement in municipal finance. Transactions are judged on various factors such as creativity, complexity and rigor, precedence-setting, and public purpose.