WASHINGTON — Montgomery County, Md., expects today to competitively sell $397 million of refunding and new-money bonds in its largest deal ever. The sale could include the triple-A county’s first issuance of Build America Bonds.
Maryland’s most populous county plans to issue $232 million of Series B bonds and $165 million of Series A tax-exempt refunding bonds. It will delay issuing $78 million of tax-exempt new-money bonds until Nov. 18 because of market conditions, according to finance director Jennifer Barrett.
Bidders have the option to bid on the Series B bonds as tax-exempt or as BABs.
The bonds are rated triple-A by Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings. Montgomery’s previous record issuance was for $300 million in 1987.
The BABs would mature between six and 20 years and would refinance all or a portion of the county’s $200 million of outstanding bond anticipation notes issued on Aug. 25, and $32 million of Bans issued after the passage of the American Recovery and Reinvestment Act on Feb. 17. The notes were issued to finance and refinance the acquisition, construction, and equipping of public improvement projects.
The tax-exempt new money that has been delayed will refinance outstanding Bans that are not eligible for refinancing with BABs because they were issued prior to the ARRA.
The refunding bonds will mature between one and 11 years and will refund certain general obligation bonds from 1999 to 2008.
Last month, Maryland postponed issuing $603 million of refunding bonds because of market conditions. Barrett said that since the state’s deal on Oct. 21, “the market has moved back to us” and justifies refunding.
“Market conditions are very good right now for refunding and we wanted to proceed with it,” Barrett said. “We could not do both” the refunding and new-money portion, she said, adding that the county expects a $7 million cash-flow savings with the refunding.
With its affluent population and proximity to the District of Columbia, Montgomery County has weathered the economic recession well, though it has slashed costs to make up for revenue declines.
Montgomery balanced its fiscal 2010 budget by cutting its labor force, cutting salaries, and lowering the required percentage of reserved revenues to 5% from 6% of total resources. Its unemployment rate was 5.3% in September, below the state’s 7.1% average.
The county last sold bonds in July 2008 to Wachovia Bank at a 4.18% true interest cost. McKennon Shelton & Henn LLP will be bond counsel. Public Financial Management Inc. is financial adviser.