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By PBN Staff
PROVIDENCE – Rhode Island’s capital city successfully sold its $39.3 million general obligation road bond issue at lower than expected rates, Mayor Angel Taveras announced Wednesday.
The city sold its bond issue to a syndicate led by Raymond James, which also included Janney Montgomery Scott, Roosevelt & Cross, and Siebert Brandford Shank, according to a release from the mayor’s office.
“I am very pleased that today’s bond issue was a success,” said Taveras in prepared remarks. “The reception that market investors gave Providence is a clear vote of confidence in our efforts to reform Providence’s pension system and put the city on a sustainable fiscal path.”
According to a release, market participants said the bond sale would be “a key test of whether investors feel comfortable with the Taveras administration’s efforts to fix a $110 million structural budget deficit.”
Investor yields for the 20-year bonds ranged from 0.78 percent to 3.93 percent. This resulted in an interest rate of roughly 3.66 percent and annual payments of about $2.9 million, “significantly lower” than the city had originally projected, said a release.
Prior to the sale, the interest rate was projected at 5 percent. The lower 3.66 percent rate is expected to save the city at least $200,000 annually on debt service.
“Providence’s successful bond issue came on an off day for the municipal bond market, with many sellers forced to re-price by raising yields rather than lower yields as Providence was able to do,” said the release.
Maturities for the issue ranged from 2014 to 2033 and maturities were oversubscribed, meaning that investors put in more orders for bonds than there were bonds available.
“Providence received more than $11 million in retail orders and many maturities were oversubscribed with strong interest from several large institutions. That allowed the syndicate to lower the yields on several maturities resulting in more debt service savings for the city,” Maureen Gurghigian, managing director for the city’s financial adviser FirstSouthwest, said in a statement.
Roughly $14.9 million of the bonds were insured by Assured Guaranty Municipal and rated “A2” by Moody’s Investors Service and “AA-” by Standard & Poor’s Ratings Services. The uninsured bonds were rated “Baa1” by Moody’s and “BBB” by Fitch ratings, based on Providence’s underlying rating.