The Dormitory Authority of the State of New York is expected to sell $217 million of school district revenue bond financing program revenue bonds in five series on Tuesday, after pricing for retail on Monday.
Roosevelt & Cross Inc. is lead underwriter and Hiscock & Barclay LLP is bond counsel for DASNY.
Proceeds from the bonds will be used to finance loans for 20 school districts in New York. All 20 districts are using Fiscal Advisors & Marketing Inc. as their financial advisor.
The structure has not been decided yet, but will likely include serial and term bonds, said DASNY’s public information officer, Beau Duffy.
The longest maturity is 30 years and all of the series of bonds will be subject to redemption.
The bonds are special obligations of DASNY, payable solely from general obligation bond payments from the school district borrowers under the program.
Both Standard & Poor’s and Fitch Ratings assign each of the series A-plus ratings. Moody’s Investors Service rates two series, assigning Series 2012B its Aa2 rating and Series 2012C its Aa3 rating.
All three rating agencies cite New York’s statutory provision to intercept state school aid, provided by New York State local finance law.
“The A-plus program rating, two notches below the state of New York’s AA GO bond rating, reflects the statutory ability to intercept available state school aid to provide funds to pay debt service if borrowers fail to make payments on the underlying loans to DASNY,” Fitch analysts said in a report.
However, the program does not include any coverage test for interceptable aid, and future borrowing by a school district, including note issuance, can dilute the amount of available interceptable state funds, the report said.
Fitch assigns a positive outlook based on the state’s outlook, which reflects actions in recent budgets to implement sustainable solutions to budgetary challenges.
Standard & Poor’s, which assigns a stable outlook, said that if school districts have adequate state aid coverage of debt service, it can achieve an A rating. The DASNY bonds receive a rating one notch higher due to some of its credit enhancement.
Enhancements include additional timing that increases the likelihood of the receipt of revenue from the state comptroller on a timely basis and a memorandum of understanding among the authority, the comptroller and the state education department.
