CTA Readies for Pension and Healthcare Bond Issuance

February 26, 2008

The Chicago Transit Authority announced today that it has assembled a diverse team of financial advisors and underwriters to guide the upcoming sale of $1.9 billion in pension obligation bonds. Recent state legislation authorized the CTA to issue bonds in order to fund its pension and establish a retiree healthcare trust. The bonds are expected to be backed through new operating funds authorized in the same state legislation.

"These bonds pave the way for long term stability of the pension fund and continued healthcare coverage for retirees," said Chicago Transit Board Chairman Carole Brown. "By lifting the burden of unfunded pension liabilities from the CTA's operating budget, it can more appropriately be focused on delivering high-quality service."

As of January 1, 2007, the Retirement Plan for CTA employees was 30 percent funded. The new state legislation requires the Pension Fund to stay above 60 percent funded through 2039, and reach 90 percent funded by 2060. It also requires creation of an independent healthcare trust to manage and provide retiree benefits.

"These bonds are helping the CTA to establish a pension and retiree health care system that is significantly more progressive than those of most government bodies. Employee and Employer contributions have increased, benefits have been adjusted, and governance has been strengthened," said CTA President Ron Huberman. "In this time of financially struggling pension plans, it is a model for what can be achieved."

The CTA's financial advisors for the bond issuance are Mesirow Financial, Peralta Garcia, Columbia Capital and Scott Balice. Katten Muchin will serve as Bond Counsel. Burke Burns & Pinelli and Gonzalez Saggio Harlan LLP will be Co-Bond Counsel.

Underwriters' Counsel is Perkins Coie and Chapman and Cutler. Co-Underwriters Counsel are Charity & Associates and Golden and Associates. Joint Book Running Manager will be Morgan Stanley, UBS and Loop Capital Markets. Co-Senior Managers are Goldman Sachs, Cabrera Capital Markets and Siebert Bradford Shank. Co-Managers are Citigroup; DEPFA/First Albany, Estrada.Hinojosa; Grigsby; JP Morgan; Rice Financial; Ramirez & Company; and William Blair & Co.

"We are proud to continue our practice of establishing talented and inclusive teams for our financial work," said Chicago Transit Board Chairman Carole Brown. "Although the numbers won't be final until we actually sell the bonds, with this team we have exceeded our standard 30 percent minority participation goals and expect that we will achieve participation well in excess of 30 percent."


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