Connecticut sale draws record retail, lower spreads
Two of three sales in Connecticut’s recent bond offering set records for retail orders, according to State Treasurer Denise Nappier.
Costs of the bonds in the state’s $889.2 million general obligation offering on Aug. 15 continued their trajectory of reduced spreads, Nappier said.
The sales included $400 million in Series 2018E Bonds to retire bond anticipation notes issued last December, $239.2 million in Series 2018F refunding bonds, and $250 million in Series A taxable bonds issued for new projects.
Nappier said the refunding will provide debt service savings of $29.6 million over nine years.
Connecticut received $1.25 billion of orders from retail and institutional investors for the 2018 Series E and F bonds, she said, while the state received $778 million for the Series A bonds.
Siebert Cisneros Shank & Co. was senior underwriter.
Because orders exceeded bonds available in some maturities, the state was able to reduce interest rates on the bonds in the final pricing, Nappier added. The overall interest cost was 3.63% on the $400 million 20-year tax-exempt bonds and 3.75% on the $250 million 10-year taxable new money bonds.
Last week’s sales achieved a spread of 82 basis points to the benchmark Municipal Market Data index on the longest maturity offered, compared with 85 in Connecticut’s GO sale in June and 96 in March.
Each of the four credit rating agencies reaffirmed their ratings and outlooks for the state. Moody’s Investors Service rates Connecticut A1, while S&P Global Ratings and Fitch Ratings rate the GOs A and A-plus, respectively. Kroll Bond Ratings Agency assigns AA-minus.
Kroll assigns a negative outlook, the others stable.
According to Nappier, the $250 million of taxable new money bonds will fund construction of the Innovation Partnership Building at the UConn Technology Park in Mansfield; renovation and construction of housing units in various towns statewide; economic development assistance under the First Five program; and funding the Small Business Express Program and the Bioscience Innovation Fund.
Total orders received on the E and F bonds on Aug. 14 were $364.6 million – the highest amount on record for GO bonds during the Nappier administration – edging the $364.3 million received in November 2008.
Day Pitney LLP and Soeder & Associates were disclosure counsel for the sale. Tax counsel were Robinson & Cole and Soeder & Associates. Financial advisors were Acacia Financial Group Inc. and PFM Financial Advisors LLC.
Connecticut Treasury intends to issue credit revenue bonds later this year, Nappier said. The state would sell these bonds in place of GO bonds under a measure the General Assembly passed in 2017.
A secure revenue stream from state income tax receipts would back the bonds. Implementation of the program is under study, including feedback from rating agencies and identification of the optimal time to introduce the bonds into the marketplace, according to Nappier.
The sale was the second under a bond covenant that commits Connecticut to four fiscal-discipline measures the General Assembly adopted. The covenant includes a pledge that the state will curb long-term liabilities, rein in spending and borrowing, and rebuild its budget reserve fund.