WASHINGTON — Triple-A-rated Prince George’s County, Md., postponed a $25 million qualified school construction bond transaction scheduled for Tuesday because of the need to disclose to investors last week’s arrest of County Executive Jack Johnson and whether it would impact the deal.
County spokesman James Keary said the arrest “should not affect the county’s credit at all.”
But county officials were still wrestling with how to word the disclosures Monday after being encouraged by transaction participants to file a material event notice on management changes with the Municipal Securities Rulemaking Board’s EMMA system.
The rating agencies have already been informed about the arrest of Johnson, who is to step down from his post in early December, according to a source familiar with the situation who did not want to be identified.
The $25 million of bonds that were to have been competitively sold represented the county’s full allocation of QSCBs for 2010. But the allocation can be rolled over into next year, the source said.
The county had already on Friday postponed a $151 million refunding bond deal because of market conditions. Those bonds also had been scheduled to price Tuesday.
Johnson was arrested at his home on Friday by Federal Bureau of Investigation agents and later charged with bribery and witness and evidence tampering, among other offenses.
The charges against Johnson stem from an alleged kickback he received from a county developer who obtained work for low-income housing projects.
Johnson and his wife, Leslie, were arrested Friday after federal agents who had been wiretapping his phone heard him instruct her to flush a $100,000 check down a toilet and stuff her underwear with almost $80,000 in cash, according to an affidavit.
Johnson, first elected county executive in 2002, had served two terms and was prevented from reelection this year by term limits.
Rushern Baker, a member of the Maryland House who was elected county executive earlier this month, is expected to take office Dec. 6.
With new management arriving in a few weeks, the county is likely to stave off any serious credit rating concerns, the source said.
Moody’s Investors Service and Standard & Poor’s had reaffirmed a triple-A rating for both postponed deals.
In August, the county’s outlook was revised to stable after being on watch for a downgrade by Moody’s.
Fitch Ratings recalibrated the county’s rating to AAA in April with a negative outlook.
A spokesperson for Moody’s declined to comment Monday on whether Johnson’s arrest would affect the county’s credit.
Standard & Poor’s officials could not be reached for comment.
The county’s last bond deal was in August when it sold $43 million of tax-exempt bonds to Barclay’s Capital and $51.5 million of Build America Bonds to Citi.
In June, the county won a lawsuit filed by union workers who had challenged mandatory furlough days. The union workers are not expected to appeal the lawsuit, according to Standard & Poor’s rating report.
The county plans to transfer to its unreserved fund balance the $10 million that it was saving for any potential settlement costs, the report said.
County lawmakers approved a $2.62 billion fiscal 2011 budget that calls for some increased tax revenues but no withdrawals from its reserve fund.
The county is in the midst of a six-year $1.6 capital improvement project, about half of which is expected to be financed with general obligation bonds, according to Standard & Poor’s.
