Chicago Tax Revenue Scheme May Not Be Bankruptcy-Proof

Law360 (April 10, 2018, 1:49 PM EDT) -- The city of Chicago has recently taken advantage of bankruptcy-remote securitization and its attendant lower interest rates. Just last fall, Chicago formed the Sales Tax Securitization Corp., the STSC, a nonprofit corporation, which issued hundreds of millions of dollars in debt in December 2017 and February 2018. Chicago conveyed its tax revenues to the STSC. The STSC issues its own bonds and creditors lend money directly to the STSC. The creditors also receive a statutory lien on the STSC’s assets (the tax revenues). STSC then remits the proceeds of the debt to Chicago.

This securitization is advantageous for both the city...

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