Massachusetts on Wednesday intends to price $380.5 million of general obligation bonds. The issuance will consist of $230.5 million of Series 2012B SIFMA index refunding bonds and $150 million of Series D consolidated loan 2012 new-money bonds.
Retail orders will receive priority, according to Colin MacNaught, the commonwealth's assistant treasurer for debt management, although there will be no separate retail day.
Morgan Stanley is lead manager.
MacNaught cited the benefits of using SIFMA Index bonds, in which the rates adjust weekly based on a Securities Industry and Financial Markets Association index.
"Our long-term goal is to minimize the state's net interest rate exposure, which includes the interest rate risk we experience in our large asset portfolio. We want the state's balance sheet to be neutral to movements in interest rates. And by issuing floating rate bonds instead of fixed rate bonds in this transaction, it's a step in the right direction," MacNaught said.
Both series of bonds will mature in 2017.
"Unlike variable rate demand bonds, the advantage of floating rate bonds is the lack of a reliance on bank liquidity and remarketing. We believe in our credit. We prefer to have our bonds price and trade based on our own credit," MacNaught added.
Fitch Ratings and Standard & Poor's rate the state's GO bonds AA-plus, while Moody's Investors Service assigns Aa1.
"We're excited about the bond sale. This is another opportunity to diversify our capital structure, and to diversify our investor base," MacNaught added.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC is bond counsel and disclosure counsel for the commonwealth, while Edwards Wildman Palmer LLP is representing the underwriters.
Wednesday's sale will mark the second offering for Massachusetts in fiscal 2013, which began July 1. On Sept. 25, it sold $400 million of Series C GO bonds, with Bank of America Merrill Lynch submitting the winning bid at a true interest cost of 3.4195%.
Massachusetts will hold its inaugural investor conference Dec. 13 at the Boston Convention & Exhibition Center in South Boston. Ten Massachusetts issuers, including the commonwealth, will make presentations and the Treasury department will launch its new website that day.
"The commonwealth is committed to being the disclosure leader in the municipal market. We are committed to building the top disclosure program through a 'bottom up' process," MacNaught told investors during a November conference call.
In the last legislative session, Massachusetts created a debt affordability board, modeled after similar boards in Maryland and Delaware. A seven-member panel, chaired by secretary of administration and finance Jay Gonzalez, will periodically review the amount and status of the state's tax-supported debt. It will produce its first report in September 2013.
"We're taking the best practices of our peer states. We think this is a positive signal to investors in terms of long-term credit stability," said MacNaught.