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New York Water Plans $435M Bond Sale

The New York City Municipal Water Finance Authority has scheduled a $435 million sale of second resolution, fixed-rate tax-exempt new money bonds on Tuesday, after a one-day retail order period.

The fiscal 2013 Series BB financing will use New York Water’s underwriting syndicate with Raymond James|Morgan Keegan serving as book-running senior manager. Barclays, Jefferies & Co., M.R. Beal & Co., and Ramirez & Co. will serve as co-senior managers. Lamont Financial Services Corp. is the financial advisor.

Fitch Ratings and Standard & Poor’s rate the bonds AA-plus, while Moody’s Investors Service rates them Aa2. The authority has $8.2 billion of first resolution and $20.1 billion of second resolution bonds outstanding.

Moody’s cited strong bondholder protections; healthy debt service coverage provided by a gross lien on the system’s revenues and enhanced by independent rate-setting ability; and the essential nature and the monopoly of New York City’s water and sewer system.

The rating agency, however, also warned that the agency’s size, age and density pose operating and maintenance management challenges, as does its need for continued large rate increases to support and maintain adequate debt-service coverage.

Moody’s also said state and federal regulatory mandates, which drive roughly 20% of the system’s capital improvement program, could accelerate New York Water’s future borrowing needs.

According to Fitch, New York Water manages its capital improvement program well. "Sophisticated capital planning efforts have helped achieve compliance with large, costly, mandated regulatory projects aiding [its] timely implementation," Fitch said.

The authority provides more than 1 billion gallons of water daily to 9 million customers. Of that total, 8.2 million are in New York City and the rest are in Westchester, Putnam, Orange and Ulster counties.

New York Water in October sold $200 million of weekly adjustable rate water and sewer system second general resolution revenue bonds. In June, it sold $662 million of second resolution, fixed-rate, tax-exempt new money and refunding bonds.

Orrick, Herrington & Sutcliffe LLP is bond counsel. Nixon Peabody LLP is representing the underwriters.

In addition, New York City plans an $850 million sale of tax-exempt, fixed-rate general obligation refunding bonds on Dec. 11, through negotiation and following a Dec. 7 and Dec. 10 retail order period, a spokesman for city Comptroller John Liu said Thursday. Moody’s rates the bonds Aa2, while Fitch and Standard & Poor’s assign AA.

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