CHICAGO - Minnesota finance officials will watch the market closely over the next week to see whether several competitive issues of more than $100 million are successfully bid before deciding whether to proceed with their planned sale later this month of about $443 million of general obligation bonds.
The top-rated state has tentatively planned to publish its offering statement next week and has set a tentative date of Oct. 28 for the sale, but others first have to take the lead in returning to the market, Kathy Kardell, the state's assistant commissioner for treasury, said late last week.
"We are preparing our documents as though we are going to sell, but we want to see some other folks competitively pricing on a consistent basis deals in excess of the $100 million range," Kardell said. "Right now I'm just not seeing that. There's no value to entering a market where people aren't prepared to put in a bid."
No new deals for more than $100 million appeared on next week's issuance calendar, although a few do remain on the day-to-day calendar.
If Minnesota does not get into the market before the end of the month, the sale would be put off until next year due to disclosure issues. The state needs to close on the transaction at least 25 days before its official November revenue forecast is released in early December. It issues two formal forecasts annually, in November and February. Gov. Tim Pawlenty will use the November figures to craft a new biennial budget.
While Kardell would like to stay on schedule, she said a delay into the next year would not pose a funding threat to any projects. The state still has proceeds from its summer sale that included about $300 million of new money. The finance department also has the ability to borrow money from the state's general fund to cover expenses until the bonds are issued.
While some issuers believe the current market turmoil provides a keen example of when negotiated sales are beneficial, Minnesota does not have that option as finance officials face a statutory requirement to issue GOs competitively.
"We are not in a position to change that at this time," Kardell said.
Officials have already opted to put off issuing another deal - a rare revenue-backed $42 million bond issue - to continue funding a statewide digital radio communications system for public safety personnel. The bonds are secured solely by a portion of the surcharge tacked onto phone bills that goes to a statewide 911 emergency fund.
The system, which enables emergency response organizations to utilize a single, integrated, and highly structured digital radio communications system, has been in the works for years. Planning and development of the first phase of the project began in 1995 - long before the 2001 terrorist attacks highlighted the need for such systems - when the state formed the Metropolitan Radio Board.
The Minnesota Housing Finance Agency also has been affected by the market turmoil. It recently decided to put off a $100 million single-family revenue bond sale as have most other agencies across the country. While agencies hope the delays are temporary, they have voiced concerns over the impact on efforts to aid low-income buyers.
No updated GO rating reports have been released anticipating the new deal. Fitch Ratings over the summer affirmed the state's top rating on $4.1 billion of outstanding GO debt. Moody's Investors Service affirmed its Aa1 rating with a positive outlook, and Standard & Poor's affirmed it AAA rating.
Minnesota currently expects to end the fiscal biennium June 30 with $153 million in the budget reserve and $350 million in the cash flow reserve, for a combined 3% of fiscal 2009 estimate revenues, although that could change based on the November forecast.
