New York City will begin its $800 million sale of tax-exempt general obligation refunding bonds with a two-day retail period that starts Monday.
The city plans to price the fixed-rate Series 2012H and I bonds through negotiation on Wednesday.
The book-running senior manager is Bank of America Merrill Lynch, with Citi, JPMorgan, Morgan Stanley and Siebert Brandford Shank & Co. as co-seniors.
Sidley Austin LLP is bond counsel, Orrick, Herrington & Sutcliffe LLP is special disclosure counsel and Hawkins Delafield & Wood LLP is counsel to the underwriters. Public Resources Advisory Group and A.C. Advisory Inc. are financial advisors.
The bonds will mature from 2012 to 2032. The city’s full-faith-and-credit pledge secure the bonds.
This is the city’s third GO sale this year. New York in March sold $470 million of new-money bonds, $100 million of taxable bonds and $370 million of tax-exempts.
In February, the city sold $1 billion of tax-exempt refunding GO bonds, an increase of more than $200 million from earlier expectations.
In the city’s most recent bond sale, the New York City Transitional Finance Authority last month issued $900 million of future tax-secured, fixed-rate, new-money subordinate bonds.
The TFA, which handles capital improvement projects, sold $800 million of tax-exempt debt and $100 million of taxable debt under the qualified school construction bonds program. The city’s net long-term debt is $41.2 billion as of March 31, according to the official statement.
Earlier this month, Mayor Michael Bloomberg introduced a $68.7 billion budget for fiscal 2013 that, while balanced, leaves the city with budget gaps ranging from $3 billion to $3.7 billion over the following years.
Moody’s Investors Service rates the bonds Aa2, and Standard & Poor’s and Fitch Ratings both assign an equivalent AA.
Standard & Poor’s, in a March 16 report, cited the city’s “substantial and diverse economic base,” financial planning process and prudent use of surplus revenues.
But offsetting factors include an “above-average reliance” on the financial services sector for resident income and tax revenue, according to S&P analysts. Wall Street experienced a slowdown in the second half of 2011 and the specter of future layoffs looms.
Standard & Poor’s also pointed to the city’s significant capital funding requirements that could strain the city’s coffers.
“Pension and post-employment benefit costs are also a significant fixed cost and [other post-employment benefit] costs continue to represent a large and growing liability,” the rating report said
Bloomberg and the 51-member City Council must agree to a final budget by June 30.
Comptroller John Liu has proposed accelerating $2 billion of capital spending over the next two fiscal years for school construction and other capital projects already approved. His office estimates that borrowing $2 billion now could save taxpayers up to $468 million in long-term borrowing costs.
“By accelerating capital costs already in the pipeline, we have an opportunity to tackle the city’s stubbornly high unemployment, address long-term infrastructure goals, tap unused capacity in the construction industry and lower long-term capital costs,” Liu wrote Bloomberg.