N.Y.C. Seeks Swap Advisers for GOs, TFA, Water Authority

New York City is seeking one or more swap advisers for the city general obligation credit, the Transitional Finance Authority, and the Municipal Water Finance Authority.

Currently, Swap Financial Group is the swap adviser for the water authority credit, and Investment Management Advisory Group Inc., or IMAGE, is adviser for the city GO and TFA credits.

One-year contracts for these firms expired in December, said Ray Orlando, spokesman for the city’s budget office. The city is looking to enter into two-year contracts with firms it chooses as a result of the latest request for proposals.

New York City currently has about $33 billion of GO debt outstanding. The original notional amount of outstanding swaps on city GOs is $2.7 billion, Orlando said.

Fitch Ratings and Standard & Poor’s rate the city’s GO debt A-plus. Moody’s Investors Service rates it A1.

The TFA was established in 1997 as the city was approaching its constitutional cap on general obligation debt, an amount determined by the state and based on property values. The TFA reached its own statutory debt limit of $11.5 billion of bonds in fiscal 2004, which ended in June of last year. The original notional amount of swaps outstanding on TFA debt is $334 million, Orlando said.

TFA bonds are backed by personal income tax revenues and, if needed, a portion of the city’s sales tax revenues. In March, the authority sold about $500 million of refunding bonds.

Fitch rates the TFA’s future tax secured bonds and its city recovery bonds AA-plus. Moody’s rates the authority’s future tax secured bonds Aa1 and the rates the recovery bonds Aa2. Standard & Poor’s rates them both AAA.

The water authority has about $10 billion of bonds outstanding. The original notional amount of swaps outstanding on its debt is $220 million, Orlando said.

Fitch rates the agency’s water and sewer revenue bonds AA. Moody’s rates them Aa2. Standard & Poor’s rates them AA-plus.

Derivates should be used for “prudent risks” and not for speculation, according to a policy statement on the water authority’s Web site.

Proposals are due to the city by Aug. 31. They will be reviewed by the city’s Office of Management and Budget and the comptroller’s office.