September 14, 2017

Dear Members of the Authority:

State of Illinois Clean Water Initiative Revolving Fund Revenue Bonds, Series 2017

Working closely with our partners at the Illinois Environmental Protection Agency (“IEPA”) and our team of professionals, including a syndicate of underwriters led by Bank of America Merrill Lynch (“BAML”) and Citigroup, the Authority successfully priced $560.025 million of Clean Water Initiative Revolving Fund Revenue Bonds, Series 2017 (“CWI/SRF Bonds”) on August 28 and 29, 2017. From past meetings, Members know the substantial commitment of organizational resources that have been devoted to this effort both from the Authority and from IEPA.

S&P Global and Fitch rated the 2017 CWI/SRF Bonds as AAA/AAA, the only natural triple-A rated bond at the State level in Illinois. The 2017 CWI/SRF Bonds are all “new money.” This transaction built upon the success of CWI/SRF transactions in 2013 (refunding 2002 and 2004 bonds, releasing debt service reserve monies for program purposes and funding State match) and 2016 (new money and funding State match). As of the September 12, 2017 closing, the 2017 CWI/SRF bond proceeds will be $664.472 million, once bond premium is included. This brings the total outstanding amount of CWI/SRF bonds to $1.116 billion ranking Illinois among the top states that have demonstrated leadership in the responsible financial stewardship of this vital federal-state-local water infrastructure finance program.

As to the pricing, Authority held a retail order period on August 28 during which time only individual investors and professional investment advisors on behalf of individual retail investors were permitted to submit orders. During the August 28 retail order period, approximately $205 million in orders were received from both individual retail investors and professional retail investors. This high level of investor interest allowed the Authority to lower yields 1-2 basis points prior to offering the bonds to institutional investors on August 29. The Authority also took advantage of both a U.S. Treasury market rally and world events that triggered a flight to quality among investors on the morning of August 29. As a result, during the pricing period, the Authority received over $1.3 billion in orders from a wide variety of accounts, including both new and returning investors. The combined total of institutional and retail interest surpassed $1.5 billion in orders which allowed for further reductions in interest rates of 2-5 basis points in various maturities. Assuming that the Authority and IEPA will continue to annually issue bonds on behalf of the Clean Water Initiative Revolving Fund program, investors will anticipate future offerings and we anticipate that investor demand will remain strong.

The Authority engaged in extensive pre-marketing activities and posted an electronic investor presentation to review the key credit strengths of the program. This effort culminated in orders from over 50 professional retail and institutional investors, several of whom were first time buyers of the CWI/SRF Bonds. The strong credit quality of the bonds was recognized by investors.

The practical benefit of this joint IEPA-Authority effort is the increased and responsible financing of vital water infrastructure, at lower costs to taxpayers, with the resulting construction jobs and economic development in communities across Illinois. We are grateful to our partners at IEPA for the opportunity to work on this project that provides real, important and immediate benefits to the people, communities and environment of our state.

Medical and Health Education in North Chicago

Since our August meeting, the Authority closed bonds on behalf of Rosalind Franklin University of Medicine and Science for an innovative but complex refunding and new money transaction involving federal New Market Tax Credits in the amount of $112.390 million. Importantly and among other purposes, the borrower will use bond proceeds to finance the construction of a new, 100,000 square foot research facility on Green Bay Road in North Chicago.

As always, I look forward to continuing to work with you in support of jobs and financing capital expansion projects throughout our state.

Respectfully,

Christopher B. Meister
Executive Director