NYC Bonds

Last month was back to business as usual with two complex bond sales.  Both the New York City Municipal Water Finance Authority (“NYW”) and New York City General Obligation (“G.O.”) credits entered the market.

$651 Million New York City Municipal Water Finance Authority Sale

NYW sold six series of water and sewer system second general resolution, adjustable rate tax-exempt new money bonds totaling approximately $651 million, using bank liquidity facilities from four banks.

Fitch Ratings rates NYW’s second resolution bonds at AA+; Moody’s Investor Service rates these bonds at Aa2, and Standard & Poor’s rates them at AA+.  Each of the six bond series also carries a short-term rating based primarily on the respective bank’s liquidity facility.

$1 Billion General Obligation Bond Sale

The City sold a total of $1.018 billion of G.O. bonds the week of September 23rd.  The sale was notable for the strong retail demand for bonds from both small investors and trusts and money manager accounts.  The sale included $300 million of tax-exempt fixed rate new money bonds, $125 million of taxable fixed rate new money bonds, and $176 million of tax exempt bonds which are being converted from variable rate to fixed rate bonds. 

In addition to the new money and conversion bonds, favorable market conditions made it possible to upsize with approximately $417 million of refunding bonds. The refunding achieved budgetary savings of more than $44 million, or more than $36 million on a present-value basis. 

The City received approximately $356 million of retail orders for the tax-exempt bonds during the two-day retail order period the second highest level in the past two years. Strong investor demand made it possible to reduce yields by one to three basis points in six maturities.  Final stated yields varied by coupon and maturity, ranging from 0.18% in 2014 to 4.28% in 2032. The $897 million in tax-exempt bonds were sold via negotiated sale through the City’s G.O. syndicate, led by Siebert Brandford Shank & Co., L.L.C.

The $125 million in taxable fixed rate new money bonds were sold via competitive bid at a True Interest Cost of 2.60%, for a 2023 final maturity with a 5.8 year average life.

Additionally, the City expects to price $400 million of tax-exempt variable rate bonds on or about Tuesday, October 15, 2013, bringing the total sale to approximately $1.422 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.  Each rating has a “stable” outlook.

Federal Sequestration

The Internal Revenue Service announced a new sequester reduction amount to be paid to issuers of direct pay bonds, such as Build America Bonds (“BABs”), Qualified School Construction Bonds (“QSCBs”) and other federal direct pay municipal debt.  The reduction for the federal fiscal year 2014 (October 1, 2013 through September 30, 2014) will be 7.2 percent. 

Sequestration, while a pain for municipalities and a drag on the national economy, will not have any effect on New York City’s debt service payments to bondholders. The City does not rely on federal subsidy payments for debt service on its GO, TFA and Water debt.

Looking Ahead   

We expect that New York City Transitional Finance Authority will offer future tax secured bonds in October.  Details on the transaction will be announced closer to the sale date.

Information on how to buy New York City bonds is available on the Comptroller’s website.  You can subscribe on our website to receive sale announcements and other City publications and reports.  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