WASHINGTON — Maryland issued $738.4 million of general obligation bonds this week, achieving its second-lowest interest rate since 1988, according to Treasurer Nancy K. Kopp.
About $56.1 million of Series A bonds were sold on a negotiated basis exclusively to retail investors and $682.3 million were sold competitively, including $543.9 million of Series B tax-exempt bonds and $138.4 million of Series C tax-exempt refunding bonds.
The interest rates of the bonds ranged from 1.69% and 2.42%.
“This low interest rate means that Maryland’s schools, colleges, hospitals, prisons and cultural projects can be built now at an unusually reduced cost,” Kopp said. “Maryland taxpayers benefit not only from saving millions of dollars because of the state’s low interest rates, but also from the investment in our infrastructure, including an estimated $350 million in schools, colleges and universities.”
“It is also good news that all Marylanders who wanted to do so were able to buy the state’s high-quality bonds during the retail sale,” Kopp said.
The negotiated sale gave first priority to Maryland residents. The retail category included individuals, bank trust departments and investment advisors with a maximum of $1 million per account, officials said.
Susanne Brogan, deputy treasurer of public policy in Kopp’s office, said Maryland prefers competitive sales and conducted very few negotiated retail sales before 2009. However, public comment from local retail investors indicated they were having trouble competing.
Earlier this week, the Municipal Securities Rulemaking Board proposed new rules and guidance aimed at ensuring that underwriters and dealers follow the instructions of issuers to sell to retail investors during retail sales periods.
Merrill Lynch, Pierce, Fenner & Smith Inc. led the group of underwriters for the retail bond sale. That series carried a true interest rate of 2.18%, and the net premium was just under $6.4 million, Kopp’s office said.
The $543.9 million of Series B tax-exempt bonds sold at a true interest cost of 2.42%. The winning bidder was Bank of America Merrill Lynch and the net premium was $65.9 million, according to state officials.
The $138.4 million of Series C refunding bonds sold at a true interest cost of 1.69%, and the winning bidder was also B of A Merrill. The net premium was $23.3 million.
There were five underwriters bidding on both Series B and Series C bonds.
Maryland is one of only eight states to carry triple-A ratings from all three major rating agencies. The others are Delaware, Virginia, North Carolina, Georgia, Missouri, Iowa and Utah.
“Today’s results were very satisfying. Again, Maryland’s triple-A rated bonds drew significant interest,” Kopp said.
Though it affirmed its assignment of the top credit rating to Maryland’s GO bonds, Moody’s Investors Service also placed a negative outlook on the bonds Feb. 22.
The rating agency said Maryland could be affected by its link to the credit of the U.S. government, which Moody’s downgraded in August 2011.
Moody’s said it will assess Maryland’s vulnerability in terms of its reliance on capital markets, dependence on federal revenues, sensitivity to macroeconomic cycles, and available financial resources to offset risks related to the U.S. government in order to determine whether to maintain the negative outlook.
Kopp’s office expects to conduct another GO bond sale in late July.
