In the largest competitive deal so far this year, triple-A rated Wake County, N.C., is expected to sell $502.4 million of general obligation bonds tomorrow to finance school construction and refund older bonds.
The deal illustrates Wake's financial strength among issuers as several triple-A states have turned to negotiated deals. Maryland, Utah, and Georgia recently switched tactics and sold GO bonds in negotiated deals, which traditionally are more expensive for the issuer. The par amount on competitive deals fell 34.4% in the first two months of 2009 from last year.
Wake's deal initially was scheduled to price in September, but like many issuers, the county delayed its sale after the bankruptcy of Lehman Brothers Holdings Inc. and subsequent market turmoil. The county, however, was able to sell bond anticipation notes in October at a 1.7% interest rate.
Now issuers are finding demand has returned and are growing confident with larger deals.
"We do think it's a stronger, more stable market clearly compared to the last seven months," said David Cooke, manager of Wake County. He said the county had to pare back projects prior to the deal.
The county expects to sell certificates of participation this summer and has bond issuances planned as part of the county's capital growth plan, he said. The county expects to finance 75% of its $1.3 billion capital improvement plan with debt financing through 2015.
Wake's deal includes $135 million of Series A public improvement bonds, with maturities between three and 17 years, that will be used to finance public school and community college construction. In North Carolina, the counties issue debt for school systems.
The deal also includes $300 million of Series B public improvement bonds that will be used to refund the bond anticipation notes. The bonds have maturities between one and 16 years. In addition, there are $67.4 million of Series C bonds, with maturities between one and six years, that will refund bonds issued in 1998.
All of the bonds have fixed rates and are uninsured. Womble Carlyle Sandridge & Rice PLLC will serve as bond counsel and Waters and Co. will serve as financial adviser for the Series C portion of the deal.
Amid the national recession, now in its 14th month, Wake County touts rare financial security as issuers face growing unemployment and falling tax revenues.
"As triple-As go, Wake County is triple-A of the triple-As," said Doug Carter, president of DEC Associates LLC, a financial advisory firm, which is not involved with the Wake deal.
Carter said North Carolina has a policy of selling competitively and that negotiated deals are rare in the state.
"It seems to me that we're in a time where the best of the best always do well," Carter said.
Wake's booming population has so far offset the recession's effects. Wake is the seventh-fastest growing county in the U.S., with a 38% population increase since 2000, according to Moody's Investors Service. The rating agencies said they expect this growth to moderate in coming years.
Still, the county cut spending 2.2% in fiscal 2009 because sales taxes and housing transaction revenues are expected to be lower this year.
The county has an overall debt burden of 2.3%, which is expected to grow as the county sells more debt. Wake has no derivative contracts associated with its variable-rate debt.