PROVIDENCE, RI -- The financial markets reacted favorably today to the State of Rhode Island's first competitive bond sale in a decade, with strong demand for the state's $125.8 million of General Obligation Bonds.
Strong demand for the state's first competitive bond sale since 2007 was reflected in the number of bidders and the pricing levels bid. The state received highly competitive bids from six underwriters for its sale of tax-exempt bonds, securing a true interest cost of 2.39 percent for the 20-year borrowing -- 0.17 percent better than the highest bid. The winning bid resulted in $2.7 million less in net debt service cost than the highest bid.
General Treasurer Seth Magaziner conducted the bond sale through a competitive bidding process to secure more favorable borrowing terms for the state.
"The very favorable outcome of the state's first competitive bond sale in a decade highlights the importance of responsible fiscal management," Magaziner said. "For too long, Rhode Island has been paying more to Wall Street than necessary every time we go to market. Reintroducing competition into our bond sale process resulted in savings to the state."
Today's sale is a portion of the state's General Obligation Bonds approved by voters in 2014. The proceeds will be used to construct a new engineering school building at the University of Rhode Island, fund projects at arts and cultural organizations, and finance other capital projects across the state.
The bonds were rated AA by Fitch Ratings and Standard & Poor's and Aa2 by Moody's Investors Service. Excerpts from the rating reports are as follows:
Moody's stated its Aa2 rating "incorporates the state's strong financial management practices" and the outlook reflects "the state's success in shoring up its finances through maintenance of adequate available reserves, narrow but sufficient liquidity, stabilizing demographic and economic trends."
Standard & Poor's considers Rhode Island's financial management practices "strong" under its Financial Management Assessment methodology, indicating practices are strong, well embedded, and likely sustainable.