Allegheny County, Pa., will come to market next week with a sale of about $196 million in general obligation bonds.
The sale mostly involves refunding, although the par amount “is a moving target,” said one banker close to the deal, citing recent interest-rate volatility in the bond markets.
Officials from the southwest Pennsylvania county, whose seat is Pittsburgh, expect to hold the retail sale Tuesday, with institutional the following day. PNC Capital Markets LLC is bookrunning senior manager. BNY Mellon is the financial advisor.
About $165 million of the deal will involve advance and current refunding, mostly of Series C-57 GO bonds the county issued in 2005. The county plans to sell a $31 million tranche to fund capital projects throughout the region. Allegheny’s full faith and credit, and taxing power secure the bonds.
County manager William McKain has told the county budget and finance committee that savings from refunding should exceed 3%. Moody’s Investors Service, which rated the bonds A1 with a negative outlook, estimates net present value savings of $4.5 million, or about 3.3%. Moody’s based its outlook on the county’s narrow cash position and limited general fund reserves.
According to Moody’s, the county’s direct debt burden is modest. The county reports $823 million of debt outstanding, which includes $727 million in fixed rate, $52 million in variable rate and $44 million synthetic fixed rate. All but $8.3 million of the county’s debt is tax-exempt.
Standard & Poor’s rates the bonds A-plus with a stable outlook. According to S&P, the county has reduced its reliance on stop-gap budget measures by curbing spending and realizing additional revenue sources.
Typically, the county annually issues about $50 million of tax revenue anticipation notes in January and repays them in April when it collects the bulk of property tax revenue. The county, though, saw no such need in 2013.
Clark Hill Thorp Reed is bond counsel. Reed Smith LLP is representing the underwriters.