Commonwealth Completes Bond Sale

Continued Strong Retail Participation Helps to Drive Down Borrowing Costs

February 24, 2009 – State Treasurer Tim Cahill announced today that his office has completed a $525 million General Obligation bond sale. The sale included strong participation from retail investors, with individual investors purchasing more than $215 million in bonds, equal to approximately 41% of the total bonds offered for sale. The all-in cost of borrowing for the entire deal was a low 4.25%.

“The support from individual investors during our retail order period was critical,” said Treasurer Cahill. “We leveraged that demand along with our strong credit rating to price these bonds at very low levels for the Commonwealth.”

The bonds will be used primarily to replace bond anticipation notes (BANs) which were issued in December when rates for long-term bonds were much higher. By issuing BANs and waiting until market conditions improved, the Commonwealth’s borrowing costs are more than 1% lower than they would have been in December. That’s equal to reduced borrowing costs of an estimated $1.25 million to $1.5 million per year or $25 million in aggregate.

“During our sale, the stock market declined, and Treasury and municipal yields increased,” said Treasurer Cahill. “But we were still able to borrow at very low levels by moving bonds around during the sale to where investor demand was strong.”

The Commonwealth General Obligation bond ratings are ‘AA/Aa2/AA’ from Fitch Ratings, Moody’s Investor Services, and Standard& Poor’s, respectively.

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