The New York City Transitional Finance Authority (TFA) sold $1.44 billion in bonds to refund previously issued securities.
The authority sold the bonds in two series, including tax-exempt and taxable securities. The tax-exempt bonds, consisting of $1.27 billion, mature between 2026 and 2042, yielding between 2.63% and 3.93%. The taxable bonds, consisting of $173 million, mature between 2024 and 2030, yielding between 4.52% and 5.09%. The securities received a rating of AAA from S&P Global Ratings, Aa1 from Moody’s Investors Service, and AAA from Fitch Ratings.
“The Aa1 subordinate lien rating reflects strong debt service coverage provided by the pledge of City of New York personal income tax and sales tax revenue; a strong legal structure that insulates TFA from potential city fiscal stress; the open subordinate lien; and New York State’s ability to repeal the statutes imposing the pledged revenues,” Moody’s analysts wrote.
The bond proceeds will refund outstanding securities to achieve debt service savings.
TFA debt is one of the primary financing mechanisms for New York City-funded capital expenditures. However, The TFA is a distinct legal entity from the city, conferring some protections for bondholders. “A key strength of TFA is its insulation from New York City bankruptcy risk,” Moody’s analysts wrote.
The issuance marked the third TFA bond sale of the year, with previous bond sales in July and August totaling more than $2 billion. The city plans to issue $10 billion in general obligation and TFA debt in fiscal year 2024, which began on July 1.
The bonds are payable by a personal income tax and a sales and use tax.
Jefferies LLC served as lead underwriter for the tax-exempt bonds. Morgan Stanley & Co LLC served as underwriter for the taxable bonds. Public Resources Advisory Group and Frasca & Associates, LLC acted as financial advisors.