Junk City: Short-term loans costing Chicago Public Schools $70K a day in interest

Penn School, West Side

The bonds of Chicago Public Schools have been rated as junk for a couple of years now.

How much does junk status cost?

A lot.

The Chicago Tribune explains:

Two expensive loans that Chicago Public Schools secured over the last week will cost roughly $70,000 a day in interest for the cash-strapped district under the terms of the deals.

The district's borrowing agreements with JPMorgan require CPS to hold $387 million in loans until at least Sept. 29. That means CPS will likely pay a minimum of roughly $7 million in interest, according to a Tribune analysis based on current interest rate forecasts and the terms of both deals.

The two loans are to be repaid with pending Illinois education grants that are delayed as state government appears to be on the brink of entering its third consecutive fiscal year without a budget while accumulating billions of dollars' worth of past-due bills.

As of June 19, when the district completed the initial loan of $275 million, the state owed the district about $467 million in grants that weren't paid during the just-completed school year. On Monday, the district borrowed an additional $112 million through JPMorgan, also backed with education grants.

If Illinois doesn't approve a budget by the end of this week it will likely have its bond ratings downgraded to junk too.

Decline and fall.