Illinois municipal bonds rallied Friday after a judge dismissed a petition that sought to restrain state borrowing and prohibit Illinois officials from making any more payments on $14 billion in debt, WSJ Pro Bankruptcy reported. After Sangamon County Circuit Court Judge Jack D. Davis II threw out the complaint challenging the validity of $14 billion in Illinois general obligation bonds, their prices rose modestly, according to Municipal Securities Rulemaking Board data. A $7.65 billion bond sold in 2003 to shore up the state’s pension funds fetched as much as 108.9 cents on the dollar on Friday, up from 107 cents on Thursday before the ruling. Those were among the securities that John Tillman, chief executive of the conservative Illinois Policy Institute think tank, had challenged in a lawsuit claiming the state had piled more debt on the state’s taxpayers than its constitution allowed. Tillman, joined by New York hedge-fund manager Warlander Asset Management LP, said that Illinois broke a state rule prohibiting deficit financing by selling debt in 2003 to close a pension gap and in 2017 to pay down government vendors. Tillman, a prominent foe of public sector unions in Illinois, had asked the county court for permission to move forward his arguments that the two issuances should be invalidated and further payments to bondholders stopped. But Judge Davis found no reasonable grounds for the complaint, saying on Thursday that it would “result in an unjustified interference with the application of public funds” and draw the courts into political questions that should be left to lawmakers.
