A J.P. Morgan logo is seen in New York City, U.S. January 10, 2017. REUTERS/Stephanie Keith

CHICAGO (Reuters) - The Chicago Public Schools (CPS) said it tapped JPMorgan as the winning bidder for an up to $396.5 million note deal aimed at keeping the cash-strapped district afloat.

The award of the notes purchase to JPMorgan Chase & Co is subject to final negotiation, according to a CPS statement on Wednesday.

The Chicago Board of Education approved the debt sale last month as a way to avoid ending the current school year early and to help make a $721 million pension payment due to its teachers’ retirement system at the end of this month.

Escalating pension payments have led to drained reserves, debt dependency and junk bond ratings for the nation’s third-largest public school system.

JPMorgan, which CPS selected as the winning bidder for the notes, has lent the school system more than $1 billion through tax anticipation notes deals over the last few years.

While the district pledged future property tax collections for those deals, the new borrowing is secured by about $467 million of CPS’ delayed grant funding from the state of Illinois, which is struggling through a second-straight fiscal year without a complete budget.

The district’s already shaky finances took a major hit with Republican Governor Bruce Rauner’s December veto of legislation that would have funneled $215 million in state funds to CPS to help it make the fiscal 2017 pension payment.