NYC Bonds

Monthly Public Finance Wrap-Up: March 2014

To Our Investor Community:

March was a busy month for New York City bond issuances with three bond sales helping to secure capital funding needs and to save water and sewer ratepayers money by refinancing higher interest-rate bonds. 

The Comptroller’s Comments on the New York City’s Preliminary Budget for FY 2015

The Comptroller released his Charter-mandated report commenting on the Mayor’s Preliminary Budget for Fiscal Year 2015 and Financial Plan for Fiscal Years 2014 – 2018 and testified on the Preliminary Budget and Financial Plan before the City Council Committee on Finance.  You may access the press release on the testimony or you may download the report.

$1.25 Billion General Obligation (G.O.) Bond Sale

On March 5, the City of New York sold $696.04 million of fixed-rate G.O. bonds.  The transaction was comprised of two series: $650 million of Fiscal 2014 Series I-1 fixed-rate new money bonds and $46.04 million of Fiscal 2004 Series A-6 fixed-rate conversion bonds that were converted from variable rate mode.  The City received approximately $278 million of retail orders for the fixed-rate, tax-exempt bonds during the two-day retail order period and final yields to maturity ranged from 0.25% in 2016 to 4.35% in 2039.  These bonds were sold via negotiated sale through the City’s G.O. syndicate, led by book-running senior manager Citigroup.

The City also priced the conversion of $250 million of bonds from Variable Rate Demand Bonds to step-coupon Floating Rate Notes (FRNs), marking the City’s second such public offering.  Of the $250 million, $100 million were offered with a three-year step, $50 million were offered with a four-year step, and an additional $100 million were offered with a five-year step. Yields as a spread to the SIFMA weekly index were plus 40 basis points on the three-year, plus 50 basis points on the four year, and plus 58 basis points on the five-year step coupon FRNs.  The sales of the FRNs were led by Siebert Brandford Shank & Co., Loop Capital Markets, LLC, and Morgan Stanley respectively.  At the end of the initial period, the City expects to refinance the FRNs

Additionally, the City priced $100 million of tax-exempt VRDBs backed by a standby purchase agreement provided by JP Morgan Chase Bank, N.A. on Monday, March 24, 2014.  Finally, the City privately placed $200 million of FRNs with Citibank, N.A. bringing the total sale to $1.25 billion.
The ratings for New York City General Obligation Bonds are Aa2 from Moody’s Investor Service, AA from Standard & Poor’s and AA from Fitch Ratings.

$547.85 Million New York City Municipal Water Finance Authority Sale

During the week of March 24, the New York City Municipal Water Finance Authority successfully sold $547.85 million of second resolution, fixed-rate, tax-exempt refunding bonds.  Strong investor demand allowed NYW to upsize the refunding by $67.85 million from the $480 million originally offered, as well as reduce yields in several maturities.  The refunding will save New York City water and sewer rate payers more than $88 million over the life of the bonds or approximately $57 million on a present value basis. 

During the one-day retail order period, NYW received over $167 million of orders. Continued strong investor demand at institutional pricing made it possible to reduce yields in four maturities by one to three basis points. Final stated yields varied by coupon and maturity, ranging from 2.55% in 2022 to 4.34% in 2039.

Fitch Ratings rates NYW’s second resolution bonds at AA+.  Moody’s Investors Service rates NYW’s second resolution bonds at Aa2.  Standard & Poor’s NYW’s second resolution bonds at AA+. 

$347.385 Million New York State Environmental Facilities Corporation

As part of a combined plan of finance with NYW, the New York State Environmental Facilities Corporation sold $347.385 million of refunding bonds during the week of March 14 on behalf of NYW.  The refunding achieved budgetary savings of $83 million or $66 million in present value savings for rate payers.

Looking Ahead

During the month of April, the New York City Transitional Finance Authority will enter the market offering $960 million second resolution bonds.  There will be a two-day retail order period on Friday, April 4 and Monday, April 7 where individual investors will have priority to purchase bonds.  For more information, please contact your financial advisor, or you may refer to the preliminary official statement.

Information on how to buy New York City bonds is available on the Comptroller’s website.  You can subscribe to receive sale announcements and other City publications and reports, including the Budget Report coming out in March.  The New York State Comptroller also maintains a website with a preliminary forward calendar for major State and City issuers.

As always, we appreciate your interest in New York City bonds.  Please contact us if you have any questions or suggestions as to how we can improve our investor communications.

Carol S. Kostik
Deputy Comptroller for Public Finance