Sangamon County Associate Judge Jack Davis dismissed a suit seeking to invalidate over $14 billion in debt issued by the state of Illinois, causing Illinois bonds to rally on Aug. 29, Bloomberg News reported.
John Tillman, head of conservative think-tank Illinois Policy Institute and backed by New York-based hedge fund Warlander Asset Management LP, sought to "restrain and enjoin the disbursement of public funds," claiming the state's pension bond sale in 2003 and debt issued in 2017 were deficit financing and not for "specific purposes," thus, they violated the state constitution.
Davis, however, decided that allowing the complaint to be filed would be an "unjustified interference with the application of public funds," even likening Tillman's plea to a "political stump speech" more than a legal pleading, according to the report.
Bloomberg News reported that bondholders Nuveen Asset Management LLC and AllianceBernstein Holding LP alleged that Warlander, a fellow bondholder, stood to profit if Tillman's case succeeded since it had purchased credit default swaps that would pay off if the state was forced to halt payments on the two debt issuances. The report said that at a hearing on Aug. 15, an attorney for Warlander and Tillman acknowledged the hedge fund purchased credit default swaps on the 2003 and 2017 bonds.
Tillman said he plans to appeal the court's decision, according to the news outlet, citing an emailed statement.
