Massachusetts lines up $1.4 billion GO sale

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Massachusetts is lining up a flurry of bond issuance over the next few months, beginning with Thursday’s planned $1.4 billion general obligation sale in three tranches.

The retail order period will be Wednesday.

The commonwealth, with Morgan Stanley as lead manager, will issue $500 million of Series E consolidated loan of 2020 GO bonds; $444.1 million of Series 2020E refunding bonds, federally taxable and commonwealth tax-exempt; and $417.7 million of Series 2020D GO refunding bonds.

Maturities for those bonds are through 2050, 2034 and 2042, respectively. Closing is scheduled for Dec. 3.
Moody’s Investors Service rates the bonds Aa1, while S&P Global Ratings and Fitch Ratings rate them AA and AA-plus, respectively. All three assign stable outlooks.

“We believe that Massachusetts' economy, with a substantial tech sector presence in the Boston area, might be well-positioned to thrive when COVID-19 pandemic restrictions are fully lifted, although capital gains tax could be a weakness in this income tax-dependent state,” S&P said in its presale report.

According to S&P, high debt and persistent underfunding of its annual actuarial pension contribution partially offsets Massachusetts’ high-income and rainy-day fund levels.

Like many states, Massachusetts has been coping with the economic fallout of the COVID-19 pandemic and a burgeoning second wave that is expected to challenge the commonwealth’s finances and burden its healthcare system.

New infections in Massachusetts exceeded 2,000 a day last week and the commonwealth recorded its 10,000th death from the pandemic on Thursday. State officials have been re-establishing field hospitals, including the DCU Center in downtown Worcester.

Cases and hospitalization rates “have been heading in the wrong direction since Labor Day,” Gov. Charlie Baker told reporters.

The state Senate is considering the revised $46 billion fiscal 2021 budget Baker proposed last month. Lawmakers over the summer and fall passed three interim budgets. The revised plan includes a withdrawal of up to $1.35 billion of the roughly $3.5 billion rainy-day balance, which officials say would result in a fund balance still above 2018 levels.

Under Massachusetts law, the House and Senate pass their own versions of the spending bill, then a concurrence panel convenes.

The revised proposal maximizes use of available federal revenue while ensuring adequate resources for the coronavirus, state budget director Michael Heffernan said on an investor call.

Next month, the commonwealth intends to hold its annual sale of revenue anticipation notes, a $1.2 billion offering. According to Deputy Treasurer Sue Perez, Massachusetts will issue $350 million of Commonwealth Transportation Fund bonds in the first quarter of 2021, and $500 million of GOs in each of the first two quarters.

On Wednesday, the Massachusetts Development Finance Agency intends to sell $51.4 million of Series 2020A commonwealth contract assistance taxable special obligation refunding bonds.

PFM is the financial advisor. Maturities will run through 2044.

The agency will use the proceeds to advance refund bonds issued in 2014 for economic development projects in Boston’s Seaport District, and in Somerville and Newton.

MassDevelopment, the state’s economic development and finance wing, began in 1998 from a merger of the Government Land Bank and Massachusetts Industrial Finance Agency. The Massachusetts Health and Educational Facilities Authority was merged into MassDevelopment in 2010.

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Coronavirus Sell side Commonwealth of Massachusetts Massachusetts Development Finance Agency State budgets Charlie Baker