New York City brings nearly $2B of GOs in crowded new-issue slate

As investors consider this week’s $12 billion new– issue calendar, nearly $2 billion of the debt available will come from New York City. 

At $1.8 billion, the deal is the largest on the calendar this week and it’s the latest offering from the city since its $1.2 billion refunding issuance in July. 

The first series, a negotiated $1.5 billion of tax-exempt GOs, will have maturity dates of 2026 through 2031 and 2037 through 2052. The second series, $300 million of taxable GOs, will have maturity dates of 2032 through 2037 and will be sold competitively. 

The retail order period for the first series is expected Tuesday with institutional pricing set for Wednesday. Loop Capital Markets is bookrunning senior manager. Competitive bids for the second series will be accepted until 10:45 a.m. on Wednesday. 

There are 25 firms serving alongside Loop Capital Markets as co-managers on the deal team. 

Public Resources Advisory Group and Frasca and Associates are co–municipal advisors, and Norton Rose Fulbright and Bryant Rabino are the deal’s co-counsel. 

NYC will benefit from the loaded refunding calendar, Patrick Luby, head of municipal strategy at CreditSights, said.

“Demand for the new tax-exempt bonds will benefit from the $7.6 billion of redeemed bond principal that will be returned to investors this month from New York issuers, but the pace of redemptions slows dramatically in September to $1.1 billion,” he said.

Through the end of July, year to date supply of bonds from New York issuers was up 69%, and Luby notes that with the recent abundance of double-exempt New York bonds and “the prospects for reduced reinvestment demand in the next month, we expect that the spreads for the tax-exempt series will be biased wider.”

In its last deal, the 10-year maturity with a 5% coupon yielded 3.16%, a 24-basis point spread over MMD’s AA yield curve and a 34-basis point spread over its AAA curve. Block trading of New York City GOs Monday showed a May 2030 maturity with a 5% coupon trading at 2.74% (+13 MMD AA), a May 2032 maturity with a 5% coupon at 2.86% (+12) and an August 2032 maturity with a 5% coupon trading at 2.91% (+17).

Given the dearth of taxable muni supply this year, Luby said the taxable bonds should attract significant demand.

New York City’s GOs are rated Aa2 by Moody’s Ratings, AA by S&P Global Ratings, AA by Fitch Ratings and AA-plus by Kroll Bond Rating Agency. 

Fitch’s rating report referenced the city’s “exceptionally strong budget monitoring and controls,” along with its “‘high’ revenue control, ‘mid-range’ expenditure control and Fitch’s expectation that the city will maintain reserves at or above 7.5% of spending.”

“These factors help offset the city’s elevated long-term liability burden, which Fitch assesses as ‘weak’ due to exceptionally high liabilities-to-personal income metric of 27%, elevated carrying costs and moderate liabilities compared to total governmental revenues when compared to Fitch’s local government ratings portfolio,” the report said. “Fitch expects the city’s long-term liabilities to remain elevated compared to personal income levels.”

Other New York debt is scheduled in September with a $1.8 billion NYC Transitional Finance Authority deal set to price in the week of Sept. 9, and a $1.3 billion Empire State Development Corporation deal the week of Sept. 16. The New York State Environmental Facilities Corp. (Aaa/AAA/AAA/) is also set to price Tuesday $218.84 million of 2010 Master Financing Program green state revolving funds revenue bonds Series 2024 B.