This is an updated version of an earlier post.
Wall Street investors gobbled up Connecticut’s latest issue of debt totaling $874.7 million, a portion of which bears a novel variable-rate feature, authorities say.
State Treasurer Denise L. Nappier announced Thursday the sale of $560.4 million of general obligation GAAP conversion bonds.
That bond package has a 15-year final maturity and an overall interest cost of 3.01 percent, Nappier said. GAAP stands for generally accepted accounting principles.
The bonds also feature, she said, a unique covenant that commits the state to pay down its GAAP deficit (estimated at $1.2 billion) over a 15-year period through annual budget appropriations.
Moreover, the state’s improved cash position means Nappier will soon notify the bank that extended the state a $300 million credit line “that there will be no need to renew.” The state never drew against the credit line from JPMorgan Chase Bank, treasurer’s office spokesman David Barrett said.
The other offering was for $314.3 million of general obligation refunding notes that extends by two years a previously outstanding bond issue, Nappier said.
It also marks the first ever U.S. issuance of so-called variable-rate remarketed obligations, or VROs, a structure that offers investors and the state more flexibility, the treasurer said. One benefit to the state is that the VROs are callable at any time, which has the potential to curb the state’s interest outlays.
In turn, investors get a product that is more competitively priced relative to other floating-rate investments, authorities said. The state’s VROs bear an initial interest rate of 0.5 percent.
Separately, the state’s top budget wrangler, Ben Barnes, said both financings will go a long way towards helping the state control its pension costs and rebuild its “rainy day” fund, among other benefits. Barnes also hailed the treasurer’s office for “their diligence and innovation.”
Both bond sales were authorized during the 2013 legislative session and closed on Oct. 24.
Moody’s Investors Service, Standard & Poor’s, Fitch Ratings, and Kroll Bond Ratings rated both GAAP conversion bonds and the ERNs at Aa3, AA, AA, and AA, respectively.
Ramirez & Co., Inc. led an underwriting syndicate on the GAAP Conversion Bonds, and Barclays was the creator and sole underwriter for the VROs.
Hartford’s Day Pitney LLP and Finn Dixon & Herling LLP serves as disclosure counsel for G bond sales, with Robinson & Cole LLP and Soeder & Associates LLC serving as tax counsel.
Acacia Financial Group, Inc. and A.C. Advisory are the financial advisors for the GO sales.
