Connecticut is in the market this week with $600 million of tax-exempt general obligation notes to finance the state’s fiscal 2009 budget deficit. Institutional sales begin tomorrow and follow a two day retail order period that began on Friday.
Citi is lead managing the issue. Day Pitney LLP is bond counsel. P.G. Corbin & Co. and Acacia Financial Group Inc. are financial advisers on the deal. The notes that carry maturities from 2012 to 2016 and are subject to early redemption.
Fitch Ratings last week downgraded its outlook on the state’s AA-rated GO debt to negative from stable, citing “sizable fiscal challenges facing the state in the current biennium and beyond.”
According to analysts, those challenges include revenue weakness due to the recession and reliance on one-shot measures to balance the budget, including the deficit financing and a $1.3 billion securitization.
Further rating action will be tied to the state’s ability to close emerging budget gaps, address structural imbalances through recurring actions, and minimize borrowing for operating expenses, Fitch said in a rating report.
The state comptroller projects a $624 million budget gap in the current fiscal year.
Fitch’s action follows Moody’s Investors Service’s outlook revision of the state to negative last month. Moody’s rates Connecticut Aa3 and Standard & Poor’s rates it AA with stable outlook. The state has $17.6 billion of tax-supported debt outstanding.