WASHINGTON — Maryland on Wednesday, will price more than $650 million of tax-exempt and taxable triple-A bonds, including some direct-pay qualified zone academy bonds, to raise money and refund previously issued bonds, said Susanne Brogan, deputy treasurer for financial policy.
The sale, to be conducted in several lettered sets, includes just over $653 million of bonds to be sold competitively for institutional investors following a $75 million negotiated tax-exempt deal for retail investors that concluded last week.
Maryland state treasurer Nancy Kopp said she has high hopes for the upcoming debt issuance.
Maryland sold over $700 million in general obligation debt last month,
"Given the current low interest rate environment, we would expect to have a very successful sale," she said.
The sales include $430 million of tax-exempt bonds, $20 million of taxable debt, $15.3 million of qualified zone academy bonds, and $187 million of tax-exempt refunding bonds, according to the preliminary official statement.
The bonds will be general obligation debt and carry Maryland's triple-A rating, which was reaffirmed by all three major credit rating agencies earlier this month. A Fitch Ratings analyst said the state's "debt oversight is strong and centralized and the debt burden is moderate," but Moody's Investors Service maintained its negative outlook on the state due to its heavy reliance on federal employment. The other rating agency is Standard & Poor's.
Kopp has contended that Maryland is economically diverse enough to weather a storm of federal cutbacks.
The sale will be overseen by the State Board of Public Works, a three-member panel comprising Kopp, Maryland Gov. Martin O'Malley, and Comptroller Peter Franchot.
Citi will be lead underwriter for the negotiated sale. Kutak Rock LLP, of Washington, D.C., will serve as bond counsel, for all of the transactions.
The majority of the bond proceeds will go toward financing various infrastructure projects around the state. In fiscal year 2011, 28% of Maryland's GO bond proceeds helped finance state-owned capital facilities, 65% was used for grants and loans to local governments for capital improvements, and 7% went toward the financing of capital improvements owned by non-profit or other private parties. The refunding bonds will refund old GO debt.
The $15.3 million of QZABs will fund improvements for schools. The QZABS are federally-subsidized debt authorized by the American Recovery and Reinvestment Act of 2009 and the Hiring Incentives to Restore Employment Act of 2010. Maryland will receive a subsidy payment from the U.S. Treasury in an amount equal to either the amount of interest payable on the bonds or the amount of interest that would have been payable if the interest were determined at the applicable tax credit bond rate.
The bondholders are not entitled to the subsidy payments.
The QZABs will be used to finance improvements at schools throughout the state, as well as for the purchase of educational materials and renovations.
Schools in both the city and county of Baltimore will benefit, as will facilities in Carroll, Cecil, Charles, Dorchester, Frederick, Garrett, Howard, Kent, Montgomery, Prince George's, St. Mary's, Washington, and Worcester counties.
All projects financed by the QZABs must be slated for completion within three years of bond issuance, in accordance with federal law. The bond closing is expected to occur on August 14.