WASHINGTON - The triple-A rated West Virginia Housing Development Fund is expected to offer up to $75 million of single-family finance bonds later this month.
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The board of West Virginia's third-largest issuer in recent years is expected to approve the sale at a meeting scheduled for April 21, according to executive director Joe Hatfield. It would be the second HDF offering this year, following a $30 million deal privately placed in February.
The fund is likely to try and privately place this latest offering, but it could decide to competitively price the bonds in late April or early May. Hatfield said the HDF would take its cues from the market. "We'll draft the documents and pull the trigger when rates look good," he said.
Bond counsel will be Hawkins, Delafield & Wood; Piper Jaffray & Co. will likely serve as financial adviser, according to Hatfield.
The new issue has not been rated, but the HDF is one of the few state housing authorities in the United States and the only state agency within West Virginia to have triple-A status. Standard & Poor's rates the fund AAA. Moody's Investors Service has rated the single-family program Aaa since 1998. Fitch Ratings rates the HDF's short-term general obligation debt an F1-plus, its highest rating for short-term debt.
"They've always been strong, but when [the fund] became triple-A, they attracted a lot of attention. Everyone took notice," said Louis Kushner, senior vice president of trading at Ferris Baker Watts Inc. "One thing we like about the HDF as a state agency is that it is staffed with people with very strong financial backgrounds who are able to maximize the agency's financial earnings."
Future revenue streams are "very stable" and the HDF's management is "risk-averse [and] willing to use resources to protect its credit quality," Fitch's Charles Giordano said.
Most bonds issued by the HDF are used to make loans to West Virginia residents for purchases of single-family homes. The agency provides mortgage financing for individuals and families through partnerships with banks, financial lenders, mortgage brokers, and nonprofit housing agencies. HDF also has programs designed to encourage economic development in the West Virginia housing market.
The HDF sold $25 million in one issue in 2003, $75.1 million in three issues in 2002, and $144.7 million in three issues in 2001, making it the state's third-largest issuer for 2000-04, according to Thomson Financial. Single-family bonds comprised the majority of those issues, though $35.1 million of the 2002 total were multifamily bonds.
"They have a very s97% of it is single-family loans with very strong insurance provisions," said Moody's analyst Ferdinand Perrault. "They have a small number of multifamily loans, and they are all subsidized; they're not really at risk. In addition, their management does a good job with theit is funded outside so the expense does not eat into the bond proceeds."
In the HDF's most recent offering in February, it went to market with $30 million of housing finance bonds, opting for a private placement to save on underwritinplaced with Fannoffered one term bond maturing Nov. 1, 2035. It received a slightly lower interest rate than the other state housing issues in the same period, according to a Piper Jaffray sale analysis.
The HDF received an interest rate of 4.375%, 2.5 basis points lower than comparable issues in the market at the same time and allowing the agency to save approximately $109,000 in debt service costs over the life of the bonds, according to the Piper report. Comparatively, the Treasury market yield on a 30-year bond was 4.45% on Feb. 14.
Those series 2005A bonds will provide funds to finance mortgage loans under the agency's single family mortgage purchase program. They are subject to the alternative minimum tax.
For the upcoming sale, Hatfield said the HDF will ask board members for authorization for up to $75 million, depending on the demand it anticipates from lenders in the state. "Given the level of business we're seeing, we'll probably go for the entire $75 million," he said.
The HDF will first attempt to privately issue the bonds before offering them for competitive sale.
"The bonds will be similar to the ones we issued in February; they'll be consistent with the same resolution," Hatfield said.
"They will sell very well," Kushner said. "There are very few natural triple-As, let alone housing funds. It's extremely rare for a bond like that."
The HDF is also developing proposals for bond sales later this year, according to Hatfield. "We'll probably do some taxable bonds with the federal home loan bank in Pittsburgh to finance economic development proposals," he said.
That sale would be in the neighborhood of $20 million and would take place in late summer, he said.
The HDF is one of seven West Virginia bond-issuing authorities brought under the control of Gov. Joe Manchin 3d by a reorganization law he signed in February. The law made Manchin chairman of the boards of each authority and gave him effective control over their bond proposals and requests for greater bonding authority.
Manchin already sat on the HDF board, however, and Hatfield said earlier this year that the reorganization law would not change the agency's operations.
"When you get a new governor in office things can be different, but since he's been there they've really stayed intact," Fitch's Giordano said.
