NEW YORK CITY BONDS ACHIEVE RECORD LOW INTEREST RATES
Mayor Rudolph W. Giuliani and Comptroller Alan G. Hevesi today announced the results of a sale of approximately $600 million of New York City General Obligation Bonds. J.P. Morgan and Company served as book-running senior manager on approximately $468 million of tax-exempt bonds with Goldman Sachs and Company, and Smith Barney Inc. serving as co-managers. Goldman Sachs International was book-running senior manager on $75 million of Floating Rate Euronotes sold out of London with Bear Stearns International Limited, Citibank International plc, Lehman Brothers, Merrill Lynch International, J.P. Morgan Securities Limited, Morgan Stanley and Company International and Smith Barney Europe Limited serving as co-senior managers. An additional $39.2 million of fixed rate taxable municipal bonds was sold by advertised competitive bidding and was awarded to Goldman Sachs and Company bidding alone, one of 10 bids submitted.
The interest rates on the tax-exempt bond portion of the bond issue were equal to the best levels achieved in the last quarter of the century for New York City compared to general indices of municipal bonds and relative to triple A rated municipal bonds. The twenty year maturity New York City bond was 104 percent of the widely referenced Bond Buyer Index and was only 40 basis points over interest rates on triple A rated municipal bonds. The pricing on the two taxable portions of the bond issue achieved the best performance ever for New York City bonds since the City began issuing taxable municipal bonds in the early 1990's.
The $75 million of taxable Floating Rate Euronotes was priced at 24 basis points over LIBOR, an improvement of 4 basis points on the results of the two prior sales of floating rate Euronotes earlier this year. The winning bid on the taxable fixed rate bonds resulted in an average interest rate of 39.2 basis points over the comparable interest rate on U.S. Treasury securities and was the first time that the City's spread over Treasuries was lower than 50.
The bond issue was a refunding of previously issued City debt. The refunding portion of the financing resulted in present value savings of approximately $46 million, or 8.2 percent of the amount of refunded bonds, and produced approximately $50 million of budget relief for the City in FY 1998 without producing budget dissavings in any subsequent year. The tax-exempt portion of the City bonds received strong interest from both retail and institutional investors. During a two day retail pre-sale order period, which ended at noon on Monday, $171 million of orders was received. Priority orders from large institutions totaled $174 million.
"The fact that both investors and the rating agencies are giving full recognition to the City's improving financial condition is gratifying," said Mayor Giuliani. Prior to this financing, Moodys Investors Service assigned a "Positive Outlook" to its bond rating for the City and IBCA, the London based rating agency, gave the City a new bond rating at the "A" level.
"The City's overall health combined with strategic use of new markets and competitive sales have clearly created a positive market for City bonds and a lower cost of funds than the City has enjoyed in a long while," Comptroller Hevesi said. "And that's a very positive trend for City taxpayers."
Contact Us | FAQs | Privacy Statement | Site Map