New money offering kicks off busy issuance year for Massachusetts

Massachusetts intends to come to market Tuesday with its first bond sale of the year, a $600 million general obligation new-money offering.

The commonwealth expects to issue $400 million of Series A and $200 million of Series B bonds competitively, Deputy Treasurer Sue Perez told investors on a conference call.

Public Resources Advisory Group is financial advisor. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC is bond counsel.

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Maturities will run from 2033 to 2040 for Series A, and from 2020 to 2032 for Series B, according to bond documents.

Also in 2018, according to Perez, the commonwealth intends to remarket $120 million of SIFMA index bonds in February and sell a further $600 of new-money GO bonds in May. In SIFMA bonds, rates are hinged on a Securities Industry and Financial Markets Association index.

Over the last three months of last year, Massachusetts sold competitively $815.2 million of GO bonds, and $142.7 million of Federal Highway Grant Anticipation notes. In addition, the commonwealth sold $593.3 million of Commonwealth Transportation Fund new money and refunding bonds through a negotiated sale.

All three sales included refunding components.

S&P Global Ratings rates the commonwealth’s GOs AA, while Fitch Ratings and Moody’s Investors Service rate them AA-plus and Aa1, respectively. All three provide stable outlooks.

S&P in June downgraded Massachusetts from AA-plus, citing the need for stabilization fund, or rainy-day, replenishment. The fiscal 2018 budget projects a roughly $70 million rainy-day deposit, said state budget secretary Michael Heffernan.

“Should the commonwealth demonstrate a renewed commitment to building its reserves during periods of economic growth, absent rising long-term liability funding pressures, we could raise the rating,” S&P said in a presale report.

S&P cited growth in technology and healthcare, consistent monitoring of expenses and revenues and executive authority to make mid-year cuts as pluses. “Debt and pension liabilities are among the highest in the nation, though these figures include borrowing and benefits for local governments,” S&P added.

Massachusetts projects a rainy-day balance of about $1.3 billion by the end of fiscal 2018.

Gov. Charlie Baker, a Republican up for re-election in a Democratic state, is scheduled to give his State of the Commonwealth address in Boston on Jan. 23, and present his new budget the same week. The fiscal 2018 budget totaled roughly $39.4 billion, after accounting for $193 million in line-item vetoes and excluding transfers to the Medical Assistance Trust Fund.

Massachusetts holds up to five investor calls annually and hosts a yearly conference in Boston.

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Sell side Primary bond market Commonwealth of Massachusetts Massachusetts
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