Regional News

New York State Prepares $269M GO Issue

Amid a volatile market and a spate of negative economic news, New York plans to make its annual general obligation bonds offering Thursday with the competitive sale of about $269 million of tax-exempt and taxable general obligation bonds.

New York sells the vast majority of its debt through public authorities rather than as GOs. The state tends to bring GO deals to market once a year and this will be the only one in the current fiscal year 2008. The state plans to sell the bonds in two series of serial bonds. Series 2008A will be sold as tax-exempt bonds with a par of $257.7 million and maturities out to 30 years. Series 2008B will be sold as taxable bonds with a par of $11.3 million and maturities out to 10 years.

The bonds are offered through the state comptroller's office and will be sold using the BiDCOMP/Parity electronic bidding system.

The proceeds of the tax-exempt bonds will finance various capital projects under several past bond authorizations. The proceeds of the taxable portion will finance capital projects under the Clean Water/ Clean Air bond act.

Dreyfus Corp. senior portfolio manager Joe Darcy said that last week saw a lot of buyers come into the market after rates had risen the week before.

"That enabled us to digest a rather formidable calendar [last] week without batting an eyelash," Darcy said. "Assuming we're in that kind of an environment next week I would think the reception for those bonds would be pretty good."

The rarity of state GOs also could favor the transaction.

"Its scarcity value usually caries it to good performance in a normal market environments," he said.

State Attorney General Andrew Cuomo is bond counsel.

The state sold $180.5 million of GOs last year and has sold $2.3 billion of GOs since 1998, according to Thomson Financial data.

About 20% of the state's revenue is generated by the financial services sector, making the state vulnerable to market turmoil. On Friday Gov. Eliot Spitzer said that the state was feeling economic pressures.

"Across the state every mayor of every city and town is feeling this unfortunate downturn, as everybody in the nation is, so we're all working together to tighten our belts, spend carefully but make sure that critical services are protected," Spitzer said. "Nobody has yet said formally we're in a recession, but certainly if you look at the markets you would get the sense that things are not moving very well .... We have to really open up the credit markets."

Spitzer said that he hoped the federal government would go beyond a short-term economic stimulus package and make capital investments to boost the economy. Such a package would be "something akin to an infrastructure set of investments that are going to develop long term capital developments that are good for the economy," he said. "Stimulating those investments would be a good wise policy move for the national economy."

The state's fiscal 2009 budget is due on April 1.

Standard & Poor's assigns its AA rating to state GOs.

"Most states are moving into a more challenging budget environment," Standard & Poor's director Robin Prunty said. New York is "watching what's happening in the market and how it may impact bonuses and personal income and retail sales and they have some reserves to address any midyear budget balance should it occur."

Moody's Investors Service assigns its Aaa rating on the state's outstanding GO and Fitch Ratings assigns its AA-minus rating.


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