The New York City Municipal Water Finance Authority on Wednesday will hold the institutional sale of $435 million of Series 2013CC water and sewer system second general resolution revenue bonds.
New York Water, which sold $56 million worth of retail orders on Tuesday, will use proceeds from the fixed-rate, tax exempt new money bonds mostly to convert $400 million of commercial paper notes to long-term debt, as well as fund its capital program.
The authority has about $8.2 billion of first-resolution debt and $20.6 billion of second-resolution debt outstanding.
Fitch Ratings and Standard & Poor's assign AA-plus ratings to the second resolution bonds, while Moody's Investors Service rates them Aa2. All three outlooks are stable.
Barclays is the senior manager. Citi, M.R. Beal & Co., Ramirez & Co. and Raymond James | Morgan Keegan will be co-senior managers. Orrick, Herrington & Sutcliffe LLP is bond counsel, while Nixon Peabody LLP is representing the underwriters.
New York Water provides more than 1 billion gallons of water daily to 9 million customers. Of that total, 8.2 million are in New York City and the remainder are in Westchester, Putnam, Orange and Ulster counties.
Standard & Poor's said its rating reflects bondholder protections, the system's fundamental credit strengths and New York Water's willingness to adjust rates when necessary, especially amid a $12.2 billion capital improvement plan with commitments through fiscal 2023.
Fitch, which said New York Water manages its credit well, also pointed to the system's regional niche.
"The combined system provides an essential service to an exceptionally large and diverse service area and benefits from an abundant, high-quality water supply exempt from expensive filtration requirements and transmission costs," Fitch wrote.
According to Moody's, credit strengths include ample water; low transmission costs relative to other large systems; comparatively modest water rates; and the authority to sell liens to monetize past-due bills.
Challenges, said Moody's, include the system's size, age and density; substantial debt; and state and federal regulatory mandates that could strain New York Water's debt profile.
Scheduled for completion this year is the second phase of the 60-mile third water tunnel, a $6 billion project connecting the city with the upstate water supply. Mayor Michael Bloomberg touted it in his state of the city speech last week.