Rhode Island will go to market on Wednesday with an $81.4 million sale of general obligation bonds through negotiation, after a one-day retail order period for state residents interested in purchasing the tax-free bonds.
Barclays Capital is lead manager for the consolidated capital development loan of 2012, Series B bonds. JPMorgan is co-senior underwriter and co-managers are Fidelity Capital Markets, Roosevelt & Cross Inc. Bank of America Merrill Lynch, Goldman Sachs and Citi.
According to a spokeswoman for General Treasurer Gina Raimondo, the proceeds will benefit various transportation, educations and open-space projects statewide.
Maturities will extend from 2013 to 2032.
In April, Rhode Island saved more than $7 million by refinancing $122.9 million. As part of that bond issue, the state also restructured $20 million Department of Transportation debt paid from the motor vehicle tax. The refinancing took debt with interest rates ranging from 4% to 5% and replaced it with new debt sold at rates below 2.5 percent on average.
Moody’s Investors Service rates the GO bonds Aa2, while Fitch Ratings and Standard & Poor’s each assign double-A. Moody’s has a negative outlook, while Fitch’s is stable.
“The negative outlook reflects the state’s narrow liquidity margins, below-average economic performance and persistent budget gaps,” Moody’s said.
Municipal bond investors, however, have praised Rhode Island for its intervention in distressed municipalities and for passing a law in 2011 granting first lien to bondholders in a bankruptcy filing.
The move helped protect Rhode Island’s bond rating while 19,000-population Central Falls filed for bankruptcy. Central Falls’ exit from a 14-month stay in Chapter 9 is all but official, with Judge Frank Bailey to sign off on the city’s five-year recovery plan later this month.
Moody’s downgraded eight Rhode Island communities in 2011. Woonsocket and East Providence are under the watches of state-appointed budget commissions, the second step in a three-tiered intervention system Rhode Island adopted in 2010.
State officials have also said they would honor the state’s estimated $116 million liability from the demise of video-game company 38 Studios LLC, which received a loan guarantee from the Rhode Island Economic Development Commission two years ago, but filed for Chapter 7 liquidation in June. The state backed the funding with its moral obligation.
“At this point for us to make the distinction between moral obligation and general obligation could jeopardize all the good work that has been done with our municipalities. I think [our work] has distinguished us from other issuers,” state revenue Director Rosemary Booth Gallogly said in a recent interview on Providence television station WPRI.
