The New York Local Government Assistance Corp. has postponed its sale of $191.2 million of Series 2011A fixed-rate subordinate-lien refunding bonds to Wednesday from Tuesday, citing disruptions from Hurricane Irene.
“We could have gone through with it on Tuesday, but we thought it was the right thing to delay it by one day,” said Thomas Nitido, deputy comptroller for budget and policy analysis for the New York comptroller’s office.
The tax-exempt bonds, issued through competitive bid, will mature from 2012 to 2021 and will refund the corporation’s Series 2008B-BV2 variable-rate demand bonds totaling $188.7 million, according to Nitido.
“The variable-rate bonds to be refunded are currently hedged with a swap to achieve a synthetic fixed rate. As part of this transaction, the corporation is planning to terminate the associated swap and issue fixed rate debt without swaps,” Nitido said.
He said a termination fee is involved, but terms are under negotiation.
The LGAC was founded in 1990 as a financing vehicle for $4.7 billion of New York State’s accrued general fund deficit.
Its goal is to reduce its annual reliance on intra-year, short-term borrowing for cash-flow purposes — also known as the “spring borrowing” — and to reduce its accumulated deficit under generally accepted accounting principles.
Its bonds are general obligations, subject to annual state legislative appropriation, and funded from 1 cent of the state sales tax.
Based on recent market conditions, the LGAC estimates it will achieve savings through this transaction, Nitido said without elaborating.
“However, the primary purpose for the refunding is to fix our variable-rate debt,” he said. Dexia Bank supports the variable-rate debt with a liquidity facility.
The LGAC, according to the preliminary official statement, has $3.1 billion of outstanding debt. Standard & Poor’s rates the underlying bonds AAA, Moody’s Investors Service rates them Aa2, and Fitch Ratings assigned a AA. All three agencies rate New York’s GOs at the double-A level.
The designated source of payment, a portion of the sales tax, “is broad-based and provides generous coverage of debt service,” according to Fitch, which assigned a positive outlook.
The LGAC has not contracted for insurance on the refunding bonds. Bidders, Nitido said, could include insurance as part of their bid price.
Whether the bonds are issued as serial or term bonds will hinge upon the structure the bidder provides. The bonds are not callable.
Orrick, Herrington & Sutcliffe LLP is bond counsel, with the attorney general’s office advising on certain matters. Public Resources Advisory Group is the financial advisor.
Bank of New York Mellon is the trustee and Carter Ledyard & Milburn LLP is its legal advisor.
