The San Mateo County Joint Powers Finance Authority plans to bring $152 million of fixed-rate lease revenue bonds to market next month to refinance auction-rate securities issued in 2003.
The authority has seen its interest costs on the Ambac Assurance Corp.-insured debt rise to about 6.3% from 3.6% since the auction-rate market meltdown, said deputy county manager Reyna Farrales. The county will spend about $4.5 million to terminate a swap that synthetically fixed rates on the outstanding ARS. The counterparties are Citi and Lehman Brothers.
San Mateo County, which separates San Francisco from Silicon Valley to the south, initially planned to reissue the bonds with variable-rate demand obligations insured by Assured Guaranty Corp.
It changed its plans when the triple-A rated insurer’s credit was put under review for downgrade by Moody’s Investors Service on July 22.
The new uninsured, fixed-rate bonds will be underwritten by Citi and Lehman. They refinance debt issued for the county’s Youth Services Campus, or juvenile hall.
The bonds are rated Aa3 by Moody’s and AA by Standard & Poor’s. Both cited the county’s high wealth levels and strong finances in reports this week.
“The ratings reflect the county’s strong tax base, which remains comparatively healthy even as other areas of the state and nation are experiencing pressure from the downturn in the residential real-estate market,” said Moody’s analyst Dari Barzel in a report. “The county’s financial position is very healthy, although the preliminary budget for the current year suggest that draws on reserves are possible.”