STRONG RECEPTION FOR NEW YORK CITY BONDS FOLLOWS IMPROVEMENT IN NYC BOND RATING OUTLOOK
Mayor Rudolph W. Giuliani and Comptroller Alan G. Hevesi today announced the results of a sale of approximately $1 billion of New York City General Obligation Refunding Bonds. The sale contained approximately $958 million in tax-exempt bonds and $64.8 million in taxable bonds. Prior to the sale, Standard & Poor's announced that it was revising its rating outlook for the City's G.O. bonds placing the general obligation rating on positive Credit Watch.
Salomon Smith Barney served as book-running senior manager with Goldman Sachs & Co. and J.P. Morgan & Co. serving as co-senior managers. The financing was a refunding of previously issued City debt that resulted in present value savings of approximately $55 million, or 5.6 percent of the amount of refunded bonds, and produced $67 million of budget relief for the City in fiscal years 1998 and 1999 without producing budget dissavings in any subsequent year.
With this bond issue, the City continues its recent track record of a succession of bond issues that have had the lowest interest costs in over one-quarter of a century. The maximum yield of 5.29 percent in 2025 maturity, and the time-weighted True Interest Cost on the tax-exempt bonds of approximately 5.11 percent, are once again the lowest in recent history. In addition to taking advantage of current low interest rates, the spread of 20 year maturity NYC G.O. bond interest rates over the widely quoted 20 year GO Bond Buyer index was reduced to 17 basis points, compared to a low of 26 basis points in July of 1997.
"The positive reaction from both the rating agencies and investors to our disciplined financial management is gratifying," Mayor Giuliani said. "It is our intention to maintain our conservative fiscal practice and strengthen the economic base of the City."
"I am extremely pleased that we have once again set a new record for low rates, and that the City's cost of borrowing keeps falling," said Comptroller Hevesi. "And, considering S & P's recently announced positive ratings outlook, these rates certainly indicate an encouraging level of appreciation for the City's strong economy."
The bonds received strong interest from both retail and institutional investors. $287 million of orders were received during a two day retail pre-sale order period which ended at 2 p.m. on Tuesday. Institutional investors submitted approximately $573 million of priority orders. Member orders plus retention bonds exceeded $1 billion. Demand was particularly strong for approximately $82 million of capital appreciation bonds (CABS) offered in the 2007, 2008, and 2009 maturities.
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