ATLANTA - Kentucky is completing a sale of at least $200 million today that buyers could find attractive simply because of the rarity of the state's paper in the market.
The bonds are being sold through the Kentucky State Property and Buildings Commission. Officials are counting on it to do well because there hasn't been a lot of paper from the state this year.
Issuance in the commonwealth dropped by more than 55% - to $406 million in the first quarter this year, from $929 million in the first quarter of 2007, according to data from Thomson Reuters.
The last issuance from the Property and Buildings Commission was in 2007 when it sold about $267 million of new-money bonds.
Proceeds from this deal will be used to mainly take out outstanding notes, according to Tom Howard, director of the Office of Financial Management.
The bonds mature from 2008 through 2027. The book-runner is Citi. The syndicate group is made up of Morgan Stanley, NatCity,and UBS Securities LLC. Kutak Rock LLP is bond counsel.
The bonds began pricing to retail investors yesterday and the sale will open to institutional investors today.
The offering comes to market following some recent negative rating action.
Fitch Ratings and Moody's Investors Service have changed the outlook on several of the states issuers, including the buildings commission, to negative from stable. Standard & Poor's, which rates the debt A-plus, left its outlooks at positive. Kentucky does not issue general obligation bonds, but instead issues appropriation-backed debt.
Moody's, in its report ahead of the deal, assigned an Aa3 to the buildings commission's lease revenue bonds. Moody's did affirm the state's issuer rating of Aa2, the Aa3 rating on the state's general-fund and road-fund supported lease appropriation debt, and the A1 rating on non-university agency fund-supported lease appropriation debt, all issued through various entities, including the Kentucky Asset/Liability Commission, the Kentucky Infrastructure Authority, the Kentucky Turnpike and by the county issuers for Administrative Office of the Courts projects.
Moody's said in the future it will consider lowering the rating if the economic slowdown continues to affect state revenues and if there is a trend of ongoing reliance on nonrecurring resources to balance the state's budget.
Standard & Poor's said the state has a diversified economic base but was still vulnerable to the impact of manufacturing job losses. It also benefits from a healthy generally accepted accounting financial position, due in part to budget balancing initiatives as well as positive revenue growth, and a low direct debt burden and low debt service carrying charges.
Officials have not pinpointed exactly when they will be in the market again.
