The Dormitory Authority of the State of New York priced $1.46 billion of state sales tax revenue bonds on Wednesday.
Despite the week's busy calendar — which featured a $1.88 billion deal from New York City — DASNY found more than enough demand for its deal. DASNY CEO Robert J. Rodriguez said he was "delighted" with the results of the transaction.
"We saw more than $1.9 billion in retail orders and $6.7 billion in institutional orders, which allowed us to tighten up yields and really get a very cost effective financing done for the state," Rodriguez said. "It's great to see that depth in the order book, especially given current market conditions. And I think it really speaks to the strength of the sales tax credit and our track record in the market."
The tax-exempt deal was planned to include a mix of new money and refunding, according to the preliminary official statement.
The deal team was led by Jefferies, Loop Capital Markets, and RBC Capital Markets, with 20 co-managers. Nixon Peabody and Bryant Rabbino were co-counsels. The Public Resources Advisory Group was the financial advisor.
"Jefferies and the syndicate worked really hard to make sure that those bonds were marketed effectively to a wide investor base," Rodriguez said.
The refunding components of the deal will refund a series of personal income tax bonds from the Empire State Development Corporation which were issued in 2015.
The bonds were rated AA-plus by Fitch Ratings and S&P Global Ratings.
The rating "is based on the solid growth prospects for dedicated sales tax revenue and on structural features that provide superior resilience relative to potential cyclicality," Fitch's analysts wrote ahead of the deal.
The bonds have 6.9x debt service coverage, according to the preliminary offering statement. Debt service coverage is projected to decline to 5.2x in fiscal year 2028-2029. Fitch's analysts said the coverage levels give the bonds a "very strong cushion despite economic sensitivity."
Many different factors are weighing on sales tax revenue at the moment, according to John Hallacy, of John Hallacy Consulting. Tariffs are likely to drive up prices, and fears of an economic slowdown or recession could dampen consumer spending. On the other hand, the stock market is doing relatively well, he said, which could encourage spending.
"There's a sense out there that things are slowing, in terms of retail activity," Hallacy said, "but we keep getting reports that the retailers are doing relatively well."
Regardless, he said, the high coverage on the bonds means that, unless there's a recession, debt service is unlikely to be a concern.
This was DASNY's first deal backed by sales tax revenue since July of 2024. DASNY has $14 billion of the bonds outstanding. Rodriguez said the "scarcity factor" may have boosted the deal's outcome.
The deal priced to yield from 2.42% for the 2027 maturity to 4.5% for the 2055. The bonds have an optional call in September 2035.
Rodriguez also credited the outcome to favorable market conditions.
"We were able to price in a rally, I think, in terms of treasuries and in terms of MMD, and I think the ratios on the front end improved a little bit from previous weeks," Rodriguez said. "All of those coming together provided a very favorable time for investors to come and to purchase the sales tax credit."
The deal team moved up the institutional pricing by a day when they recognized the strong market tone, Rodriguez said.
Investors had a chance at plenty of other New York debt last week, and showed hunger for those bonds as well.
New York City priced $1.88 billion of taxable general obligation bonds. The deal was upsized by $130 million. The deal was comprised of $460 million of social bonds supporting affordable housing and $1.42 billion for the city's capital program.
The city received $3.6 billion of indications of interest, for a 1.9x oversubscription rate,
The city received a second party opinion from S&P Global Ratings affirming alignment with the International Capital Markets Association's Social Bond Principles.
"Due to investor demand, the spread to the reference Treasury on the Social Bonds was reduced between IOI and final pricing by 4 basis points," the city said in the press release.
The social bonds, all in a 2055 maturity, priced at par to yield 5.392%, an 80.2 basis point spread to Treasuries, according to data published on LSEG's TM3. They are not callable.
The remainder of the city's GOs priced to yield from 3.806% for a 2028 maturity to 5.559% for a 2045. The $519 million 2051 maturity priced at 5.372%, according to TM3. Those bonds carry a 10-year par call.
In the retail order period on Monday, the city received only $300 million of orders. Birch Creek strategists described this as
The underwriting syndicate was led by Wells Fargo and Rice Financial Products with seven co-senior managers.
The deal is the latest in a
On Wednesday, BofA Securities priced $504 million of affordable housing revenue bonds for the New York State Housing Finance Agency.
The proceeds from the DASNY deal will fund New York's capital projects. According to Rodriguez, that includes investments in higher education — particularly the State University of New York — affordable housing, projects for the Department of Environmental Conservation, transportation infrastructure, and economic development initiatives.
DASNY last
DASNY chooses the timing of its deals carefully, Rodriguez said, in collaboration with other arms of the New York government.
"We work really closely with the Division of Budget and the financial advisors to try and figure out the optimal timing and size and structure of each sale," Rodriguez said, "and then think about that in the context of our general calendar for the year, as well as cash flow needs."
Rodriguez said this deal's performance shows that "people recognize the strength of New York paper," and that they trust the state to make policy decisions that keep its credits intact.
"There's always going to be a consideration on a flight to quality," Rodriguez said. "And we believe that our bonds represent that in the marketplace. So we're mindful of maintaining that brand for investors."
