Bonds

New York State agency plans $151M green bonds

New York State is heading to market with a sale of green bonds aimed at refunding some debt previously issued for special projects.

Loop Capital Markets and Barclays Capital as lead managers plan to price the New York State Environmental Facilities Corp.’s $150.555 million of Series 2023A tax-exempt state revolving funds revenue green bonds on Tuesday after a one-day retail order period.

Academy Securities, American Veterans Group, J.P. Morgan Securities, Raymond James and Wells Fargo Securities are co-managers.

The deal is being sold under the 2010 master financing indenture program (MFI) and the Series 2023A GOs will be issued as senior bonds under the MFI program.

Proceeds will be used to refund bonds that had been issued to finance or refinance eligible clean water and drinking water projects in the state.

HilltopSecurities and RockFleet are the financial advisors. Squire Patton Boggs, Soeder & Associates and the Hardwick Law Firm serve as bond counsel.

The deal, with interest payable May 15 and Nov. 15, is structured as serials maturing from 2023 to 2043.

The NYS EFC provides strong financial management for the program, including in-depth loan and investment review and surveillance procedures, officials said.

The Series 2023A bonds will be issued as senior bonds under the 2010 MFI.

The bonds are rated triple-A by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings.

Moody’s said its rating “reflects the strength of the loan portfolio repayment stream across all indentures and the ability to tolerate a high level of unlikely loan defaults without impairing debt service payments over the life of the bonds.”

It noted NYS EFC’s strong balance sheet and long track record of successful program management and oversight are integral components of the credit quality.

Additionally, Moody’s said the program’s legal structure, which allows for transfer of excess cash flows between indentures, coupled with potential cross-investment between the clean water and the drinking water SRFs, in case of a payment deficiency, support credit stability.

Still, Moody’s noted the strengths are tempered by the high concentration of the loan pool in New York City Municipal Water Finance Authority.

“Despite the concentration being mitigated by the strong credit quality of NYC MWFA’s pledged second resolution bonds (Aa1, stable), it exposes the program to potential shifts in NYC MWFA credit quality,” Moody’s said.

“The outlook is stable, reflecting our expectation that management will maintain strong financial and liquidity position, the credit quality of NYCMWFA will remain stable, and that additional leveraging of the program will not result in lower debt service coverage ratio or default tolerance,” Moody’s said.

Fitch, which also has a stable outlook on the credit, said NYS EFC’s cash flow modelling “demonstrates that program resources are sufficient to withstand hypothetical pool defaults in excess of Fitch’s AAA liability rating stress hurdle … without causing an interruption in bond payments.”

The rating agency said about 90% of the borrowers in the 2010 MFI pool have investment-grade ratings and most obligors are secured by borrowers’ general obligation or utility revenue pledges.

The primary source of payment for the bonds is pledged recipient payments, which are expected to be greater than the debt service on the bonds and other obligations.

The master trust agreement provides security in the form of a de-allocated reserve account and additional security comes from a parity commitment to use any amounts available in the clean water SRF and drinking water SRF’s unallocated equity accounts to meet shortfalls.

As of April 1, the NYS EFC had issued 20 series of senior bonds under the MFI program totaling about $2.57 billion, of which around $1.6 billion is outstanding.