The state of Washington issued $1.09 billion in bonds to refund previously issued securities.
The bonds mature between 2024 and 2040, yielding between 2.69% and 3.32%. They pay interest at 5%. The securities received a rating of AA+ from Fitch Ratings, Aaa from Moody’s Investors Service, and AA+ from S&P Global Ratings.
The rating reflects Washington’s “broad and growing economy, with solid long-term revenue growth prospects, and demonstrated commitment to fiscal balance and long-term liabilities that place a low burden on resources,” Fitch analysts wrote.
Washington will use the issuance proceeds to refund bonds that it sold in 2010. To do so, Washington will rely on an “extraordinary event” provision in the 2010 bond agreement, which was backed by a 35% federal subsidy at the time of sale. That subsidy was rolled back in 2013.
An increasing number of municipal issuers are relying on the “extraordinary event” provision to refinance so-called Build America Bonds that they sold more than a decade ago. Debt issued this year generally pays lower yields than the Build America Bonds.
Investors, who could take losses from the refinancings, are not taking the news quietly. Two investors have emailed Washington’s deputy treasurer to complain about the deal, Bloomberg reported. Meanwhile, a group of investors has threatened legal action against the University of California for its own “extraordinary event” refinancing.
Washington’s bonds are general obligations of the state, backed by its full faith, credit, and taxing power.
Wells Fargo Bank, NA, served as lead underwriter on the issuance, purchasing the bonds for $1.24 billion. The price reflected a premium of $149 million. Piper Sandler & Co and Montague DeRose and Associates, LLC acted as financial advisors.