The Chicago Tribune reports:
After putting a long-expected bond sale on hold last week, Chicago Public Schools managed to borrow $725 million Wednesday by promising investors extraordinarily high interest rates.
Bonds issued by taxing bodies like CPS are normally considered sound investments, but that's not the case with a school district weighed down by debt, labor uncertainty and political tumult, one market analyst said.
"This is not a typical municipal bond," said Matt Fabian, a partner at Concord, Mass.-based Municipal Market Analytics. "You can't go into it assuming that you know what's going to happen or that you will almost surely get your money back. There is a large degree of speculation."
Documents released early Wednesday afternoon show CPS sold 28-year bonds at yields of 8.5 percent. Before the district pulled its bond issue last week, it was offering 25-year bonds at 7.75 percent. By comparison, when the state of Illinois sold bonds earlier this month, yields were 4.27 percent for 25-year bonds
There's more:
Historically, 12 percent of municipal borrowers with CPS' current rating from Moody's have defaulted within five years, according to an analysis by the ratings agency.
The high cost of free education.
