The Dormitory Authority of the State of New York is bringing $450 million of mostly refunding bonds to the market in three deals this week.
DASNY will sell $372 million of refunding bonds for various New York school districts on Tuesday, $58 million of refunding bonds for the Long Island University on Wednesday, and $23 million of new and refunding bonds for the Culinary Institute of America on Thursday.
RBC Capital Markets is expected to price the school districts revenue bond financing program bonds in six series, after being priced for retail on Monday.
Proceeds from the bonds, structured as serial and term, will be used to refund the authority’s Series 2002 bonds, originally issued to finance loans to school districts.
The bonds are special obligations of DASNY, payable solely from general obligation payments from the 48 school district borrowers under the program.
No school district is responsible for the payment obligations of any other school district and any failure to pay by a single school district may result in a state intercept of pledged revenues.
“A statutory state school aid intercept enhances the credit quality of the districts’ GO bonds and is the basis for the rating,” said Fitch Ratings, assigning an A-plus rating and a positive outlook to the bonds.
Fitch expects annual coverage of debt service by state aid to remain solid. The 2012 state budget included a year-over-year cut in state school funding, but the state announced plans to increase state spending growth on schools going forward based on income growth in the state, with projected increases of about 4% per year.
Fitch also cited strong support from New York, rated AA, and positive state credit momentum.
Standard & Poor’s assigned different ratings to each of the six series, ranging from A-plus to AA-plus, based on the different participating schools.
On Wednesday, Piper Jaffray will price $58 million of revenue bonds for Long Island University, located in Brookville, N.Y.
Proceeds will refinance the Series 1999, 2003A, and 2003B bonds for an estimated total savings of $7.6 million over the life of the bonds, which will mature from 2013 through 2027, and in 2032.
The bonds will be subject to early redemption and are payable solely from certain payments to be made under the loan agreement, which is a general obligation of the university.
Moody’s Investors Service recently revised the outlook to negative from stable and assigned a Baa3 rating.
“The negative outlook reflects recent declines in the university’s liquidity position with limited prospects for material improvement, significant swap collateral postings and thinner headroom relative to debt covenants,” analysts said in a report.
The Baa3 rating reflects the university’s large enrollment and operating revenue size relative to its rating category, with six major campuses in the greater New York City area.
Deterioration of unrestricted liquidity, breach of bond covenants, or acceleration of variable rate demand debt could cause a rating downgrade.
Standard & Poor’s assigned an equivalent BBB-minus, citing the university’s strength of operations, as well as its low levels of financial resources and low matriculation rate. The outlook is stable.
The $23 million of revenue bonds for the Culinary Institute of America, located in Hyde Park, N.Y., will be priced by RBC on Thursday.
The proceeds will be used to finance the construction of a 42,000 square-foot, two-story theater and conference center for the institute and to refund outstanding bonds.
Ahead of the sale, Moody’s revised the outlook to positive from stable, citing expectations of consistently strong cash flow supporting the accumulation of flexible reserves and continued strong philanthropic support.
“The Baa2 rating reflects the institute’s robust market position as one of the nation’s leading providers of culinary education, and dedicated operating discipline resulting in consistently healthy operating cash flows,” analysts said in a report.
The rating could go up if there is a continuation of positive operating performance and substantial increase in total cash.
