Pennsylvania Completes Nation's Largest Competitively Bid Bond Sale Since September 2008

Wall Street Response Shows Continued Faith in Commonwealth

HARRISBURG, Pa., May 19 /PRNewswire/ -- Pennsylvania today completed a $1 billion bond sale that was the nation's largest competitively bid general obligation bond sale since the near-collapse of the financial markets in September 2008, Governor Edward G. Rendell said.

The bond sale – split into two offerings that included $548.9 million in federally taxable Build America Bonds and $451.1 million in tax-exempt bonds – resulted in the commonwealth receiving its lowest interest rate ever for any non-refinancing deal: a combined 3.11 percent for the two offerings.

"The outstanding response to our sale is further proof of the high regard Wall Street has for the commonwealth," the Governor said. "Our record of sound fiscal management and the measures we are taking to ensure Pennsylvania's solid and continuing recovery from the recession are resonating with the financial community."

The Governor said the Build America Bonds component of today's sale appealed to investors and helped the commonwealth garner its record combined low interest rate. Pennsylvania issued its first set of Build America Bonds in January; that $604 million sale was the largest competitively bid Build America Bonds deal at that time.

He also praised the federally backed program for its effect on Pennsylvania.

"The Build America Bonds program has been a tremendous help to Pennsylvania in recovering from the recession," the Governor said. "These bonds fund construction projects that provide jobs for our residents and improve the quality of life in communities across our state."

The Governor also praised the program for the generous federal subsidy it provides the commonwealth – the equivalent of 35 percent of the interest on the bonds over the 20-year life of the bond issue.

"With today's sale and our last bond sale in January, the commonwealth has issued more than $1.15 billion in Build America Bonds," the Governor said. "While we are still calculating the savings from today's sale, our analysis of the January sale shows the commonwealth will save nearly $47 million over 20 years."

Build America Bonds, which were enacted as part of the American Recovery and Reinvestment Act of 2009, are attractive to investors because they produce higher yields than tax-exempt bonds. Since they are backed by the commonwealth's sound credit rating, they are secure.

The Governor noted that the U.S. Congress is expected to vote soon on whether to extend the Build America Bonds program.

"I urge our federal lawmakers to vote yes on continuing this vital program," the Governor said. "We as a nation cannot afford to lose the momentum we have gained in putting the recession behind us."

The interest rate for the Build America Bonds sale was 3.33 percent, and the winning bidder was Banc of America Merrill Lynch. Other bidders were Citigroup Global Markets Inc.; J.P. Morgan Securities Inc.; Morgan Stanley & Co. Inc.; Goldman, Sachs & Co.; and Barclays Capital, Inc.

In the tax-exempt component of today's sale, the interest rate was 2.51 percent, and the winning bidder was J.P. Morgan Securities Inc. Other bidders were Citigroup Global Markets Inc.; Banc of America Merrill Lynch; Barclays Capital, Inc.; Goldman, Sachs & Co.; and Morgan Stanley & Co. Inc.

The combined proceeds from today's bond sale will be used for construction projects statewide, including local economic development, bridge repair and rebuilding, flood control, water and sewer, and Growing Greener II environmental projects.

Governor Rendell also shared good news about the commonwealth's credit ratings.

Last month, two of the three major credit rating agencies – Fitch Ratings and Moody's Investors Service – recalibrated their rating systems to bring municipal lenders in the United States in line with major private corporations and foreign countries. In doing so, Fitch upgraded the commonwealth's credit rating from AA to AA+. Moody's upgraded the commonwealth's credit rating from Aa2 to Aa1.

Standard & Poor's did not recalibrate its rating system; its credit rating for the commonwealth remains AA.

"The strong ratings from all three agencies reflect Wall Street's approval of the commonwealth's prudent fiscal management and its continuing faith in the value of our bonds," the Governor said.

Editor's Note: For more information about this week's bond sale, go to the Office of the Budget website at www.budget.state.pa.us and click on the Bond and Tax Note Sale Information link in the left navigation bar.

Media contacts:

Gary Tuma, Governor's Office; 717-783-1116

Susan Hooper, Office of the Budget; 717-265-8067

SOURCE Pennsylvania Office of the Governor