D.C.’s $350M GO Sale, Set for Today, Likely to Be Insured

WASHINGTON — The District of Columbia today intends to sell competitively up to $350 million of general obligation bonds, and will probably insure the bonds despite the fallout from the subprime mortgage crisis, officials said.

However, the district is likely to go with an insurer that has generally avoided the turmoil, they said.

The bond issue also is dependent on whether market conditions will allow the city to obtain good interest rates.

District Treasurer Lasana Mack said he is optimistic. “We expect to get it done successfully at a favorable interest rate,” he said.

The bonds will go towards financing a variety of capital improvement projects. About a quarter of the proceeds will be used to finance improvements to the district’s public school system, with the rest to be divided among park and recreation facilities, police and fire departments, and bridge rebuilding and repair.

The issuance marks the district’s second such offering of the year. In June, it completed its largest ever such sale — $576 million of GOs and $251 million of refunding bonds.For this GO deal, Phoenix Capital Partners LLC and Public Resources Advisory Group are serving as financial advisers while Orrick, Herrington & Sutcliffe LLP is bond counsel.

The bonds will be the first the city has issued since discovering a huge scandal within its tax collection office.

Two employees have been charged with stealing a now-reported $44 million of district taxes over roughly eight years through phony property tax refund checks. But the scandal, which is still unfolding, does not appear to be effecting the district’s bond issuance.

All three major credit agencies have reaffirmed their previous GO ratings for the district. Fitch Ratings and Standard & Poor’s both rate the credit A-plus, while Moody’s Investors Service rates it A1.

A ratings report issued by Standard & Poor’s does not mention the scandal and cites “sound financial operations” in its explanation for the rating.

Meanwhile, the number of people implicated in the tax theft rose to seven on Monday as a former assistant branch manager with Bank of America was charged with helping to launder the stolen money.

The District Council and office of the chief financial officer, which is headed by Natwar Gandhi, announced yesterday that they plan to bring in auditing firm PriceWaterhouseCoopers and law firm WilmerHale to investigate the theft. WilmerHale conducted inquiries during the Enron investigation.

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