Vying for lead management of the deal are Bank of America, Bear Sterns, Lehman Brothers, Paine Webber and Salomon Smith Barney.
The CHA is tapping the capital markets in order to acquire the necessary funding to speed up its Plan for Transformation, a 10-year, $1.5 billion effort that will fundamentally change the CHA. The plan calls for tearing down many of the authority's dense high-rise complexes and replacing these with scattered, low-rise developments throughout the city.
The bond issue will essentially be an advance payment against revenues CHA expects to be getting from the Department of Housing & Urban Development, payments that will be pledged against the bond issue as security. "By getting the money now, we will be able to do in five years what it would probably have taken seven years to do," says Verduzco.
Verduzco says that the CHA has had only very preliminary discussions with the bond rating agencies that will assign a credit rating to the issue. Next to the general level of market interest rates at the time of issue, this will be the most important determinant for the CHA's ultimate cost of funds. Because the payments backing the bonds are Federal, it is likely that the bonds will carry the highest possible credit rating.
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