Nassau County to Sell $328.5M on Thursday

Nassau County, N.Y., plans to sell $328.5 million in long- and short-term debt on Thursday.

The tax-exempt debt will be sold in two forms. The county will issue $141.5 million of long-term general obligation general improvement bonds, and also offer $187 million of GO bond anticipation notes maturing on Feb. 5, 2014.

The bonds will be sold competitively; the notes will be issued via negotiation.

The bonds have serial maturities ranging from April 1, 2014, to April 1, 2043. The bulk of the bonds' principal is to be retired in the longest maturities.

Bond proceeds are being used for various public purposes.

Proceeds from the notes will be used to repair county facilities damaged by Hurricane Sandy.

The Nassau County Interim Finance Authority has approved the Long Island county government's issuance of the debt.

Fitch Ratings and Standard & Poor's give the bonds an A-plus rating. Moody's Investors Service gives them an A2 rating, one notch lower.

The notes are rated SP-1-plus by S&P and F1 by Fitch. Bank of America Merrill Lynch is the senior manager of the notes sale.

The bonds are subject to an optional call on April 1, 2022, or any date thereafter.

On the positive side, Fitch explained its A-plus rating on the bonds by pointing to the county's moderate debt burden, wealthy residents and high property values.

On the negative side, it pointed out that the government has a high reliance on short-term borrowing for repayment of outstanding cash-flow notes.

Fitch also noted that Nassau has minimal financial flexibility, with "high dependence on economically sensitive sales-tax revenue, consistent use of nonrecurring measures to close budget gaps, depletion of reserves, and long-term labor contracts."

S&P pointed to similar factors, and also noted the county's proactive budget management.

Moody's downgraded the long-term debt to A2 from A1 in October. Like S&P, Moody's has a stable outlook on the debt. Fitch has a negative outlook.

"The A2 rating reflects the county's weakened financial position in fiscal 2011 and significantly reduced liquidity, weak governance practices, and significant exposure to variable-rate debt and interest-rate swaps," wrote Moody's analyst Robert Weber.

At the end of fiscal 2011 the county's operating fund balance declined to $84 million, or 3.4% of operating revenues, Weber wrote.

However, Moody's expects the Nassau's debt to remain manageable. When the debt of underlying agencies is included, the county government's debt is currently 3% of full valuation. That is slightly above the 2.7% median for all Moody's-rated New York counties.

The county plans to repay the notes with Federal Emergency Management Agency and state reimbursements stemming from Sandy claims, according to S&P. If Nassau doesn't have the reimbursements by final maturity, the county will roll over the notes or issue bonds.

For reprint and licensing requests for this article, click here.
New York
MORE FROM BOND BUYER