Connecticut will begin a two-day retail order period Tuesday for its $400 million general obligation bond sale, its first of 2014. The negotiated sale will include $100 million of SIFMA index bonds, which are tied to a Securities Industry and Financial Markets Association index.
Bank of America Merrill Lynch is the lead manager. Acacia Financial Group is the financial advisor. Proceeds will fund various statewide capital projects.
The institutional sale and final pricing is set for Thursday.
The $300 million of GO bonds will mature in 2034, the SIFMA index bonds in 2023.
Moody's Investors Service rates the bonds Aa3, while Fitch Ratings, Standard & Poor's and Kroll Bond Rating Agency rate them AA. Fitch assigned a negative outlook last July, while the others assign stable outlooks.
"The negative outlook reflects the state's reduced fiscal flexibility at a time of lingering economic and revenue uncertainty," Fitch wrote in a presale report.
Gov. Dannel Malloy last month proposed his $19 billion biennial budget to state lawmakers. The spending plan, up 2.7%, calls for universal pre-kindergarten and other educational initiatives, and $500 million to bolster the state's rainy-day fund, pay an additional $100 million toward the state's pension fund and earmark $155 million of a projected $505 million surplus to issue a $55 sales- and gas-tax refund to all residents.
The fiscal 2015 budget is the state's initial budget using generally accepted accounting principles.
Kroll said the state's ongoing lag in economic recovery and its strain on the budget will continue to pressure Connecticut's fiscal operations. Kroll also said the reduction in defense spending may also hurt the state's economy and finances. Connecticut is home to many defense contractors, including United Technologies Corp. and General Dynamics Corp.
Connecticut's capital city, Hartford, received a two-notch upgrade last week to AA-minus from A, with a stable outlook. S&P also raised the rating on the city's bond anticipation notes to SP-1-plus from SP-1 to reflect the higher rating.
"The stable outlook on the long-term rating reflects our view of the city's adequate budget performance and flexibility due, in part, to its strong financial practices," said analyst Hilary Sutton.
