The state of Connecticut sold $555 million of general obligation bonds on Wednesday — one day ahead of schedule — due to favorable market conditions.
Retail pricing began on Tuesday and continued on Wednesday followed by institutional pricing.
The deal includes $212.4 million of general obligation SIFMA index bonds, $259.6 million of general obligation bonds, and $83 million of taxable general obligation bonds.
The first series of SIFMA bonds featured maturities ranging from 2014 to 2020 and were priced 25 to 135 basis points above the SIFMA municipal swap index, which was 0.18% as of April 4. Credits maturing in 2013 were offered via sealed bid.
Yields on the $259.6 million of GOs ranged from 2.08% with 3%, 4%, 5% and 2% coupons in a split 2021 maturity to 3.55% with 3.5% and 4% coupons and 3.3% with a 5% coupon in a split 2032 maturity. The bonds are callable at par in 2022. Yields were raised two to six basis points across the curve from retail pricing.
Final pricing on the taxable bonds was not available Wednesday afternoon.
This is the fourth time Connecticut has issued SIFMA bonds, which are variable-rate bonds offering yields at a spread to the Securities Industry and Financial Markets Association rate. According to a spokesperson, the state issues SIFMA bonds because of the attractive cost of financing, without the need for a bank credit facility. Most of the proceeds from the offering will go toward local school construction and clean-water fund grants, a spokesperson said.
For this transaction Connecticut has utilized a new underwriting team, led by Barclays Capital, for the first time.
Day Pitney LLP is lead bond counsel. Acacia Financial Group and A.C. Advisory Inc. are co-financial advisors.
The bonds are rated at Aa3 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings. All assigned stable outlooks.
S&P said the rating reflects Connecticut's substantial and diverse economic base, high wealth and income levels.
"In our view, despite these strong fundamentals, the state has a history of what we consider cyclical budget performance, which has led to its issuances of debt to cover operating deficits in recession periods," said S&P analyst Robin Prunty.
All three rating agencies cite high debt levels and pension problems as challenges to Connecticut's rating.
Funded ratios for the state's pension funds are "among the lowest in the country and likely to remain well below average," said Moody's, which downgraded Connecticut's GOs from Aa2 in January.
The bonds also received the first municipal bond rating assigned by the Kroll Bond Rating Agency. The agency assigned a double-A and said a growth of 1% in 2011 and declining unemployment rates are a positive.
