August 27, 2020 – New York City priced its first General Obligation transaction since the onset of COVID-19. Based on a press release by the Mayor’s Office and Comptroller Scott Stringer, the refinancing achieved a massive $239 million in debt service savings.
With last week’s Transitional Finance Authority (TFA) achieving $370 million in debt service savings, the city has now locked in over $600 million of budget savings in the space of two weeks.
Both GO and TFA transaction are scheduled to close on Sept 9 and Sept 1, respectively, based on offering statements.
The transaction was led by Citigroup, with BofA Securities and Ramirez having co-senior manager roles.
The GO transaction has received investor focus, given recent disclosures on declining revenues and the city’s status as the epicenter of COVID-19 outbreak. The offering documents disclosed the city’s revenues are projected to decline by $1.2 billion (2020), $6.3 billion (2021), $3.4 billion (2022) and $2.5 billion (2023), with the city stating most of the impairment was “primarily from the impact of the COVID-19 pandemic”.
Prior to pricing, the three major rating agencies all affirmed ratings at Aa1 (Moody’s) and AA (S&P and Fitch). Moody’s and Fitch has the city’s GO rating at a “negative” outlook.
The press release disclosed $2.1 billion in retail and institutional orders, roughly 2x the amount of tax-exempt bonds offered for sale. In addition to the tax-exempt tranche amounting to about $1.1 billion, $287 million taxable bonds were sold competitively, with Morgan Stanley and Bank of America Securities submitting winning bids.
The final 4% maturity in 2034 priced at 1.86%. On the most recent GO transaction that priced in March, led by RBC Capital Markets, the 4% maturity in 2036 priced at 1.75%.
NYC GO bonds are one of the most liquid municipal securities in the industry and are especially sought-after by individual investors based in New York City, where the bonds are “triple tax-exempt” (federal, state and local taxes).
Contact Karen Bigelow at KBigelow@buymuni.com.
