WASHINGTON - The District of Columbia is planning to price roughly $523 million of general obligation bonds next week and "strong demand" is expected both because of improved ratings and the fact that it's been awhile since D.C. issued long-term, fixed rate GOs, said D.C. Deputy Chief Financial Officer and Treasurer Jeffrey Barnette.
D.C. also plans to issue tax and revenue anticipation notes in November and to refund a small variable rate deal that month, he said. The date for D.C.'s next large bond issuance for capital improvements after these GO bonds hasn't been set yet, he added.
The District is expecting to price the GO bonds on Oct. 7 and 8. The negotiated sale will include roughly $386 million of new money and $137 million of refunding bonds, Barnette said.
D.C. now has its highest ever across-the-board GO bond ratings, according to city officials. On Monday, both Fitch Ratings and Standard and Poor's upgraded the District's outstanding GOs to AA from AA-minus and assigned double-A ratings to the bonds likely to be sold next week. . The upgrades bring Fitch and S&P's ratings in line with D.C.'s Aa2 rating from Moody's Investors Service.
Barnette told The Bond Buyer that the District hopes it'll be able to get better pricing because of the upgrades, but that until pricing occurs, the District will not know exactly how much it will be able to save, he added.
S&P's upgrade "is based on a record of general fund surpluses that have strengthened flexibility," credit analyst Hilary Sutton said in a release. The rating agency also said that by issuing the refunding bonds, "the District will have reduced its contingent liability risk."
Fitch said its upgrade was due to "the District's strong financial performance and clear fiscal flexibility, despite significant contraction in its primary economic driver." The rating agency also said D.C. has sound fiscal management practices, solid reserve balances and well-managed retiree liabilities.
"These ratings are proof, once again, that the District of Columbia should have budget autonomy. Our financial condition is excellent and we manage our budgets as well as or better than any other major city or state," D.C. Mayor Vincent Gray said in a release. "Fiscal prudence has been a major tenant of my administration" and the rating increase "validates the financial decisions we have made," he added.
The rating reports pointed to the District's high debt levels as a weakness.
The new money bonds likely to be priced next week will be used to finance capital projects. The refunding bonds will be used to current refund D.C.'s 2008A and 2008D variable rate bonds, which are currently being held by Citi, which purchased them, Barnette said.
The District last sold GO bonds in December 2013 and that deal consisted largely of bonds with short and mid-range maturities, he said. On the other hand, the upcoming deal will be more concentrated in longer maturities. The final maturity of the bonds issued last December is 2030, while the new money issue to be sold is expected to include a term bond of about $194 million maturing in 2038, according to the preliminary official statement.
A syndicate led by Loop Capital Markets will underwrite the bonds. Bryant Miller Olive P.C. is serving as bond counsel.
