UPDATE: Despite State Oversight, Nassau Sells $207M Muni Deal
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--Nassau County sells debt despite continued fiscal stress
--County gets lower interest rate than prior bond sale
--Rating agencies generally see state oversight positively
(Adds comments from Nassau spokeswoman in paragraphs three and four.)
A term sheet showed Bank of America Merrill Lynch placed the winning offer on the competitive sale, where banks place bids on bonds and sometimes reoffer them to investors.
Kara Guy, a spokeswoman for the county, said Nassau received five bids from banks on its deal. The county is a collection of mostly affluent suburbs just east of New York City.
"We are very pleased with the outcome," she said, noting the county received an interest rate of 3.61%, versus 4.71% in a sale last year.
In the Nassau sale, Bank of America didn't reoffer about two-thirds of the deal, suggesting at least some of the bonds may have been presold to yield-hungry investors, said Kathy Bramlage, director at Treasury Partners, a unit of financial-advisory firm HighTower Advisors in New York.
"It's A-rated, and it's a New York name with a lot of yield on it" in an usually low-interest-rate environment, she said.
New York is a high-tax state, so there's generally strong demand for debt from its issuers. Nassau County bonds have more yield because of the county's well-publicized financial troubles, said Bramlage, who declined to comment on whether her firm bought any Nassau debt from this sale.
The bonds that Bank of America did reoffer mature in seven to 10 years, as well as in 15 to 17 years. A 10-year maturity was reoffered with a yield of 2.65%, a term sheet showed, 0.80 percentage point more than comparable triple-A-rated debt on Thomson Reuters Municipal Market Data's benchmark scale.
Not all investors thought the debt was attractively priced. Michael Pietronico, chief executive of Miller Tabak Asset Management in New York, said his firm owns some other Nassau County debt but he passed on this sale. He said his firm could buy Nassau bonds at higher yields in the secondary trading market.
Nassau County's fiscal troubles have been well publicized. Last year, the state's Nassau County Interim Finance Authority, or NIFA, assumed control of the county's finances, which was challenged at the time by County Executive Edward Mangano. NIFA took control of Nassau's finances because it estimated the county's 2011 budget gap at $176 million, well above the trigger set in the state law creating the board in 2000.
Rating agencies generally view the board's takeover as a good thing, but challenges remain. Moody's says Nassau still has an "extremely narrow cash position," which may pressure it to do short-term borrowing throughout the year.
Fitch Ratings noted that the county continues to rely on one-time measures to patch budget gaps. Currently, Nassau is considering privatizing its sewer system, using part of the upfront payment to help mend its budget, which Fitch called a "concern."
On the positive side, both rating agencies noted the county has above-average wealth levels, and a large, diverse tax base, which benefits from the county's proximity to New York City.
Moody's and Standard & Poor's give Nassau's bonds midlevel investment-grade ratings of A1 and A-plus, respectively. Fitch, meanwhile, rates the bonds a notch higher, at double-A-minus, the fourth highest of 10 investment-grade ratings. Fitch says proceeds from this week's bond sale will be used for capital projects, termination pay, and judgments and settlements.
-By Kelly Nolan, Dow Jones Newswires; 615-679-9299; kelly.nolan@dowjones.com
--County gets lower interest rate than prior bond sale
--Rating agencies generally see state oversight positively
(Adds comments from Nassau spokeswoman in paragraphs three and four.)
By Kelly Nolan Of DOW JONES NEWSWIRESNassau County, N.Y., sold $207 million in general obligation bonds Wednesday, even as a state control board continues to actively oversee its finances and Moody's Investors Service warned the county still has "limited financial flexibility."
A term sheet showed Bank of America Merrill Lynch placed the winning offer on the competitive sale, where banks place bids on bonds and sometimes reoffer them to investors.
Kara Guy, a spokeswoman for the county, said Nassau received five bids from banks on its deal. The county is a collection of mostly affluent suburbs just east of New York City.
"We are very pleased with the outcome," she said, noting the county received an interest rate of 3.61%, versus 4.71% in a sale last year.
In the Nassau sale, Bank of America didn't reoffer about two-thirds of the deal, suggesting at least some of the bonds may have been presold to yield-hungry investors, said Kathy Bramlage, director at Treasury Partners, a unit of financial-advisory firm HighTower Advisors in New York.
"It's A-rated, and it's a New York name with a lot of yield on it" in an usually low-interest-rate environment, she said.
New York is a high-tax state, so there's generally strong demand for debt from its issuers. Nassau County bonds have more yield because of the county's well-publicized financial troubles, said Bramlage, who declined to comment on whether her firm bought any Nassau debt from this sale.
The bonds that Bank of America did reoffer mature in seven to 10 years, as well as in 15 to 17 years. A 10-year maturity was reoffered with a yield of 2.65%, a term sheet showed, 0.80 percentage point more than comparable triple-A-rated debt on Thomson Reuters Municipal Market Data's benchmark scale.
Not all investors thought the debt was attractively priced. Michael Pietronico, chief executive of Miller Tabak Asset Management in New York, said his firm owns some other Nassau County debt but he passed on this sale. He said his firm could buy Nassau bonds at higher yields in the secondary trading market.
Nassau County's fiscal troubles have been well publicized. Last year, the state's Nassau County Interim Finance Authority, or NIFA, assumed control of the county's finances, which was challenged at the time by County Executive Edward Mangano. NIFA took control of Nassau's finances because it estimated the county's 2011 budget gap at $176 million, well above the trigger set in the state law creating the board in 2000.
Rating agencies generally view the board's takeover as a good thing, but challenges remain. Moody's says Nassau still has an "extremely narrow cash position," which may pressure it to do short-term borrowing throughout the year.
Fitch Ratings noted that the county continues to rely on one-time measures to patch budget gaps. Currently, Nassau is considering privatizing its sewer system, using part of the upfront payment to help mend its budget, which Fitch called a "concern."
On the positive side, both rating agencies noted the county has above-average wealth levels, and a large, diverse tax base, which benefits from the county's proximity to New York City.
Moody's and Standard & Poor's give Nassau's bonds midlevel investment-grade ratings of A1 and A-plus, respectively. Fitch, meanwhile, rates the bonds a notch higher, at double-A-minus, the fourth highest of 10 investment-grade ratings. Fitch says proceeds from this week's bond sale will be used for capital projects, termination pay, and judgments and settlements.
-By Kelly Nolan, Dow Jones Newswires; 615-679-9299; kelly.nolan@dowjones.com
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