The New York City Municipal Water Finance Authority has scheduled for Tuesday a competitive issuance of $458 million of new-money and refunding bonds.
New York Water intends to sell $250 million of new money and $208 million of refunding water and sewer system general resolution revenue bonds, fiscal 2012 Series AA.
The authority will use the proceeds to fund capital improvements and refinance the 2033 maturity of the Series 2001C and the 2034 maturity of the Series 2002G bonds.
They involve a 10-year call. No swaps or insurance are involved.
“I’m very optimistic, because of where the market is,” executive director Thomas Paolicelli said in an interview.
Fitch Ratings and Standard & Poor’s have assigned AA-plus ratings to the bonds, while Moody’s Investors Service rates them a notch lower at Aa2.
Standard & Poor’s also affirmed its AAA and AA-plus long-term and underlying ratings, with a stable outlook, on the MWFA’s existing first- and second-resolution bonds, respectively.
According to Standard & Poor’s, New York Water has about $8.8 billion of first-resolution debt and $17.7 billion of second-resolution debt.
A first-lien pledge on the system’s gross revenues secures the first resolution debt. A debt service reserve provides additional liquidity to the first-resolution debt.
Standard & Poor’s analysts said the difference in ratings between the first- and second-resolution debt reflects lien priority and the active use of both liens.
The rating agency said MWFA’s long-term credit strengths include bondholder protections, effective management and willingness to adjust rates when necessary, “especially in the face of a sizable capital improvement plan of $14.6 billion in forecasted capital commitments through fiscal 2021.”
Fitch said New York Water’s primary credit strength is its legal structure, including its status as a bankruptcy-remote issuer.
That, Fitch said, provides bondholders substantial protection from utility-system and city municipal operating risks.
Lamont Financial Services Corp. and Drexel Hamilton LLC are the authority’s financial advisors. Orrick, Herrington & Sutcliffe LLP is bond counsel. Aecom USA Inc. is the engineering consultant and Amawalk Consulting Group LLC is the rate consultant.
The authority, which the state Legislature established in 1984, manages New York City’s water and wastewater system, along with the New York City Water Board and the New York City Department of Environmental Protection. A seven-member board of directors governs it.
The system provides more than 1.2 billion gallons per day of drinking water to more than eight million city residents and another one million users in four upstate counties bordering on the water supply system.
The water supply grid covers 6,600 miles.