State Plans $51M of COPs

Rhode Island intends to go to market Thursday to refinance $51 million of certificates of participation. The plan is “in response to market conditions, namely the interest rates being lower and presenting us with a savings opportunity,” according to Peter Kerwin, spokesman for state Treasurer Frank Caprio. The state will only move forward with the refinancing if it is able to secure a net present-value savings of 3%, or approximately $2 million, the treasurer’s office said. Morgan Stanley is the leader underwriter, and Merrill Lynch & Co., UBS Securities LLC, Banc of America LLC, and Roosevelt & Cross Inc. are co-managers for the deal. Partridge Snow & Hahn LLP is bond counsel, and First Southwest Co. is Rhode Island’s financial adviser. The state will get quotes for insuring the 10-year COPs today. The sale will occur a week after Fitch Ratings placed Rhode Island’s approximately $1.5 billion of outstanding general obligation and related state appropriation-backed bonds on negative watch. The rating action reflected “weak tax revenue collections” this year and the announcement of lowered revenue forecasts for the current and upcoming fiscal years, according to Fitch. Rhode Island’s two largest revenue sources, personal income taxes and sales taxes, are forecasted to drop 1.6% and 1%, respectively, in fiscal 2008 before recovering in fiscal 2009. The state’s budget office projects deficits of $152 million for the current fiscal 2008 year, and at least $380 million for fiscal 2009. Fitch said it will resolve the negative watch “based on the direction of the state’s economy and revenues in the coming months and state actions to address the projected deficits in the current and next fiscal years.” Fitch rates Rhode Island AA and the lease debt AA-minus. Moody’s Investors Service assigns Rhode Island’s GO debt a Aa3 rating, and Standard & Poor’s gives it a AA rating.