New Hampshire is looking to refund all $60 million of its auction-rate securities while it also plans to issue $30 million of new money in March.
"The marketplace - especially with the auction-rate securities - is so volatile right now that we're looking for ways to exit that market," said state Treasurer Catherine A. Provencher.
While New Hampshire has not yet experienced any failed auctions, it did experience a jump in rates last Thursday when $30 million of the auction-rate general obligation securities reset to 6%. Over the last eight weeks, New Hampshire's Thursday auction rates, which are reset every week, have averaged 3.19%, Provencher said. The other $30 million of debt is reset every Tuesday, and it has a reset average of 3.36% over the last eight weeks, she said.
"It's advantageous to exit the market as soon as we can if the auctions continue to reset at 6% or higher," Provencher said. "We are hopeful to get out of ARS without too much damage."
New Hampshire is weighing its options for a likely refunding of the $60 million and has not yet decided if it will refinance the debt to fixed or variable rate. Provencher noted that there are advantages to both, as fixed-rate refunding would allow the state to know what its debt service needs would be for the long-term, while variable-rate debt historically has been at lower yields than fixed-rate debt.
New Hampshire issued the $60 million of auction-rate debt in two $30 million series in 2004 for capital projects, she said. At that same time, it issued about $42 million of taxable pension bonds for a judicial retirement plan. Provencher said that the state issued the auction-rate debt at the same time as the taxable debt "to normalize our payment stream over a 20-year horizon."
The 10-year taxable issue resulted in a higher debt service payment, and the 20-year auction rate resulted in a lowered debt service payment, which helped even out debt service payments, the treasurer said.
"We look for consistency in our payments," Provencher said. "We wanted to try and normalize those payments so there aren't peaks and valleys."
The rate of the other $30 million was to reset yesterday. The results of that reset were not available at press time. Financial Security Assurance Inc. insures both of New Hampshire's $30 million auction-rate series.
While New Hampshire decides how it will refund its auction-rate debt, it is also readying $30 million of GO new money to be issued likely in the second week of March.
The sale will be competitive, and the money will be used for highway-related projects. The state's current biennium budget allows for $60 million of general obligation bonds to be issued for road and bridge repair projects. New Hampshire plans to issue $30 million in March, and then another $30 million in either December or January. This will be the largest issuance in more than a decade for highway-specific projects in the state, Provencher said.
Edwards Angell Palmer & Dodge LLP is bond counsel on the upcoming new-money deal, and Public Resources Advisory Group is financial adviser.
New Hampshire does not usually insure its GO debt and has no plans to insure this upcoming $30 million deal, Provencher said. Moody's Investors Service rates the state's outstanding GO debt Aa2, while Fitch Ratings and Standard & Poor's rate it AA.
As of June 30, 2007, New Hampshire has $654 million of outstanding GO debt.
The state is also anticipating a $100 million revenue bond sale in either May or June for the New Hampshire Turnpike System and has not yet determined whether it will insure those bonds, according to Provencher.
"One of the hallmarks of New Hampshire's credit rating is their debt position, and by that I mean that all but certain Turnpike debt is GO that amortizes very swiftly," said Fitch director Kyle Gephart. He also noted that the state has "an economy with a track record of resilience."
