ANNAPOLIS (March 5, 2009)—The Maryland Board of Public Works on Wednesday completed the successful sale of $490,800,000 of General Obligation bonds. The BPW is compried of Governor Martin O’Malley, Comptroller Peter Franchot and Treasurer Nancy Kopp.
For the first time in modern Maryland history, the State sold bonds totaling $291,580,000 by direct retail sale through a group of underwriters, giving first priority to Maryland residents. Bonds were available for sale in denominations of $5,000 each, beginning Friday, Feb. 27, 2009 and ending on Monday, March 2. The average interest rate for these retail bonds was 3.47 percent.
Of the $291,580,000 sold in the direct retail sale, refunding bonds totaled $65,800,000.The sale of these bonds saved the State of Maryland $2.9 million in debt service payments.
The success of this retail sale has motivated the State to consider again offering a first priority to Maryland citizens in its next sale of general obligation bonds scheduled for early August 2009. Investors can check www.buymarylandbonds.com for updates.
Traditionally, large institutions had been the primary purchasers of the State’s general obligation bonds sold by competitive bid. Availability of these bonds to individual investors had been limited.
At Wednesday’s competitive sale, $199,220,000 of bonds sold at an interest rate of 3.39 percent, one of the lowest rates in 20 years for Maryland’s general obligation bonds. The winning bidder was Merrill, Lynch. The sale occurred at 11 a.m. during the bi-weekly meeting of the State’s Board of Public Works. Treasurer Kopp said, “We did extremely well in our first-ever direct retail sale, allowing Maryland residents to buy our Triple AAA-rated bonds, thus making a great investment in their State. Marylanders, like institutional investors, have made what I call a ‘flight to quality.’”
“Despite the difficult economic climate, our institutional sale also surpassed expectations. We attracted a very favorable interest rate, a benefit to our taxpayers. Investors, both individual and institutional, appreciate Maryland’s sound, prudent financial management,” Treasurer Kopp said.
On Friday, February 20, 2009, all three bond rating agencies—Standard & Poor’s, Moody’s and Fitch Ratings—affirmed the State’s Triple AAA bond rating. Maryland is one of seven states to currently hold the AAA rating, the highest possible rating, from all three major bond rating agencies. This rating enables the State to borrow money to undertake critical building projects, such as public schools, community colleges, prisons, hospitals, cultural projects and other facilities, at lower interest rates.
In assigning its AAA long-term rating and stable outlook, Standard & Poor’s cited Maryland’s “well-defined financial management policies and a commitment to reserves despite budget challenges.”
Fitch Ratings, in assigning its AAA rating and stable outlook, said, “The state has taken prompt and repeated action to preserve operating balance to date, including tax increases, several rounds of spending cuts, as well as a rainy day fund draw.”
In explaining its Aaa rating and stable outlook, Moody’s said, “Maryland has a good history of managing its finances through periods of fiscal stress…Moody’s expects that, like other Aaa-rated states, and in keeping with Maryland’s historically conservative financial management and aggressive approach to dealing with budget shortfalls, the state will soon stabilize its finances.”
Source: Maryland State Treasurer’s Office