Providence benefits from strong investor interest, confidence in Taveras administration's successful efforts to put City on sustainable fiscal path.
The City of Providence successfully sold its $39,345,000 general obligation (GO) road bond issue at lower than expected interest rates today to a syndicate led by Raymond James and including Janney Montgomery Scott, Roosevelt & Cross and Siebert Brandford Shank.
Market participants said the 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.
"I am very pleased that today's bond issue was a success," said Mayor Taveras. "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."
Investor yields for the 20 year bonds ranged from 0.78% to 3.93%, resulting in an interest rate of approximately 3.66% and annual payments of about $2.9 million - significantly lower than the City had projected.
Prior to today's sale, the interest rate was projected at 5%. The lower rate will save Providence at least $200,000 per year 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.
Maturities for this issue ranged from 2014 to 2033. Maturities were oversubscribed, meaning investors put in more orders for bonds than the number of 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," said Maureen Gurghigian, managing director for FirstSouthwest, the City's financial adviser.
Approximately $14.9 million of the bonds were insured by Assured Guaranty Municipal and, therefore, rated "A2" by Moody's Investors Service and "AA-" by Standard & Poor's Ratings Services. In addition, the uninsured bonds were rated "Baa1" by Moody's Investors Service and "BBB" by Fitch Ratings based on the City's underlying rating.