New York City Plans $940 million of New-Money GOs for September

New York City plans to sell $940 million of new-money general obligation debt next month, the city announced yesterday.

The city will begin a three-day retail order period for $700 million of tax-exempt fixed-rate bonds on Sept. 5 with institutional pricing beginning on Sept. 10.

Citi will be book-runner and JPMorgan, Merrill Lynch & Co., and Morgan Stanley will be co-senior managers.

The bonds' structure has yet to be determined and the decision whether or not to insure the bonds will be made on the day the bonds price, said office of management and budget spokesman Raymond Orlando.

The city plans to sell about $150 million of tax-exempt variable-rate demand bonds on or about the closing date of the fixed-rate bonds. Further details on the VRDBs will be announced later, Orlando said.

An approximately $90 million taxable fixed-rate portion will be competitively priced on Sept. 10.

Sidley Austin LLP is bond counsel. Public Resources Advisory Group and A.C. Advisory Inc. are financial advisers on the deals.

Standard & Poor's assigns its AA rating to the city's GO debt. Moody's Investors Service rates the city's GOs Aa3 and Fitch Ratings assigns its AA-minus rating.

The city's monthly report on economic conditions released on Monday paints a grim employment picture. The city lost 4,000 jobs in the securities industry in June, the largest monthly decrease since October 2001.

Employment in the securities industry has fallen by 10,300 jobs on a year-over-year basis, a 5.4% drop. The securities industry has announced more than 50,000 layoffs but there is likely to be a lag in those layoffs showing up in the data because of severance packages, according to the report.

The non-finance private sector continues to gain jobs, 32,000 year-over-year as of July 2008. But that growth represents a falloff compared to the 76,200 jobs gained year-over-year in July 2007.

Vacancies for office space have risen to 6.9% in the second quarter of calendar 2008 compared to 5.4% in the second quarter of 2007.

Robin Prunty, senior director at Standard & Poor's, said that while it doesn't have any revenue revisions at this time for the city, she expects there could be some in October when the city does its financial update for the first quarter of fiscal 2009.

"The forecast certainly included an expectation of sharply slower economic growth," Prunty said. The city is "usually very quick to have a plan in place once the adjustment is announced."

The city's conservative budgeting practices have given it "a lot of flexibility to manage downside risk to the budget," Prunty said.

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