June 8, 2018

Wall St. flocks to CT's 'GO' bonds

Connecticut's financial pledge to live within its means ahead of its $492 million sale of debt has proven to be catnip for Wall Street investors eager for lucrative, yet safe investment returns.

State Treasurer Denise L. Nappier announced Friday that eager individual and institutional investors flooded Connecticut's debt underwriters earlier this week with $1.5 billion worth of orders for the state's issue of general obligation, or GO debt, and refunding notes, more than triple the amount available.

But the real winners were Connecticut taxpayers, who will pay less interest over time on this round of debt than on a previous round sold back in March, Nappier said.

Debt-sale oversubscriptions are fairly common, if market conditions and the debt-issuers' credit ratings are right, she said. Fitch Ratings scored Connecticut's debt an "A+," partly due to the covenant.

"The timing of our sale could not have been better," Nappier said. "It capitalized on the excellent market tone in the municipal bond arena this week. In addition, this result appears to reflect, in part, the market's positive reception of the bond covenant to guarantee fiscal
restraint that was adopted by the legislature last October."

Connecticut included a restrictive covenant to the $492 million issue that is triggered if the state budget, among other financial metrics, fail to meet certain minimum thresholds.

The state treasury sold $400 million in new money bonds, with a true interest cost of 3.53 percent and $92 million in refunding bonds, with a true interest cost of 3.28 percent. The refunding will provide debt service savings of $11.2 million over the next nine years, Nappier said.

The bonds are scheduled to close June 20.

The latest GO bonds were sold by an underwriting syndicate led by Bank of America/Merrill Lynch.

Disclosure counsel are Day Pitney LLP and Soeder & Associates. Tax counsel are Robinson & Cole and Soeder and Associates.

Financial advisors are Acacia Financial Group, Inc. and PFM Financial Advisors LLC.

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