Illinois Reduces Risk of Bank Swap Fees If Rating Is Cut to Junk
- State renegotiates triggers to 2 steps below investment grade
- Without a budget, S&P has warned of junk rating around July 1
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Illinois’s bankers agreed to soften the blow if the state’s bond rating is downgraded to junk.
Barclays Bank Plc, JPMorgan Chase & Co. and Bank of America Corp. revised interest-rate derivative contracts so Illinois won’t face some $38 million in fees as long as it’s not dropped any further than one step below investment grade, Eleni Demertzis, a spokeswoman for Governor Bruce Rauner, said in an emailed response to questions from Bloomberg News. That threshold had been one step higher, which would have allowed the banks to cancel the trades and demand payment for the full market value.