Triple-A Arlington County Targets Retail in GO Sale

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BRADENTON, Fla. — Virginia’s gilt-edged Arlington County will sell $127 million of general obligation public improvement bonds beginning Monday using a three-day sale structure.

The bonds will be sold to retail investors in a negotiated sale Monday and Tuesday. Any bonds not sold will be competitively sold Wednesday and available to institutional investors.

The structure was first used by the county in 2009 after the bond market froze and there was less participation by institutional investors.

It was designed to diversify interest in Arlington’s debt and develop a retail base of investors, according to county finance director Michelle Cowan.

Out of $80.5 million of GOs issued in 2009, the county sold $54 million, or 67%, to retail. Arlington residents bought $21 million, or 26%, of that deal.

“In addition to diversification, a ­secondary public-policy benefit is when Arlington residents can actually buy ­county bonds for facilities that they use every day,” Cowan said. “It’s a positive experience.”

More than 300 individuals placed calls to the finance department for that issue, which required the county to appoint a full-time person to handle calls.

The deal reaped a true interest cost of 3.07%, the lowest interest rate the county had seen since 1987.

The three-day structure was not used on a more complex deal last year when Arlington sold $139.1 million of GOs, which included $41.3 million of taxable Build America Bonds, $32 million of tax-exempt GOs, and a $65.8 million refunding.

“The state of Delaware pioneered this approach a number of years ago,” said JoAnne Carter, a managing director at Public Financial Management Inc., the county’s financial adviser. Maryland has used it as well, she added.

To supplement marketing efforts, the county has launched a website at www.buyarlingtonvabonds.com.

Next week’s new-money offering is expected to have maturities from 2012 to 2031 with Arlington’s traditional structure of level principle repayment for every maturity except the first two years, Cowan said.

Rapid retirement of debt, she added, is one reason Arlington has retained triple-A ratings from Fitch Ratings, Moody’s Investors Service and Standard & Poor’s for more than a decade.

Next week’s bonds carry those top ratings from all three agencies.

Cowan said she expects good demand for the upcoming bonds because of the high ratings and light supply of Virginia paper that is available in the market currently.

The county has been authorized to sell a refunding component up to $80 million but the present-value savings must be 3% or higher.

Cowan said earlier in the week that if refunding bonds are sold it would be a much smaller amount due to market ­conditions.

Arlington is a fast-growing suburb of Washington, D.C., with no incorporated towns or cities within its 26-square-mile boundary, according to the website for prospective bondholders.

Arlington has an estimated population of 210,280 in January, an 11% increase since 2000.

Morgan Stanley is senior manager for next week’s retail sales. Co-managers are BB&T Capital Markets, Citi, Edward Jones, and Morgan Keegan & Co.

McGuireWoods LLP is bond counsel. Kutak Rock LLP is underwriters’ ­counsel.

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