Fiscal 2010

  • The Commonwealth has entered the municipal market three times in Fiscal 2010 with bond issues.
  • Two of three bond sales have been for new-money purposes.
  • Both of the new-money bond sales have taken advantage of the new Build America bond sale, which was authorized as part of the federal stimulus legislation.

  • May 5 th - $450 million General Obligation Bonds Consolidated Loan of 2010, Series A (Federally Taxable - Build America Bonds - Direct Pay to Issuer)
    • The Commonwealth held its second sale of general obligation Build America Bonds (BABs)
    • The $450 million in bonds were sold via competitive sale, the largest competitive bond sale in the Commonwealth's history
    • It was also the second largest competitive sale of BABs since the program started in April 2009 (according to Bloomberg, approximately $98.5 billion in BABs have been sold nationally since April 2009)
    • All-in cost of borrowing (net of the 35% federal subsidy on the interest costs) was a very low 3.17%, the lowest borrowing rate for the a fixed-rate transaction in Commonwealth history (this is also the lowest TIC for a BABs sale of $200 million or more since the program began)
    • Achieved savings versus selling bonds as traditional tax-exempt securities of approximately $42 million on a present value basis
    • In the competitive auction for the bonds, the Commonwealth received eight separate bids for the bonds.
    • The bonds were awarded to Morgan Stanley based on that firm's lowest average yield for the bonds (also know as True Interest Cost or TIC) net of the 35% subsidy the Commonwealth will receive from the U.S. Treasury for selling the bonds under the BABs program.
    • The bonds sold in 2028 and 2029 were priced at a spread of 52 basis points (100 basis points equal 1%) above the 30-year Treasury yield on May 5 th.
    • This is also the lowest spread to the 30-year Treasury for any BABs priced to-date

  • March 11 th - $538.12 million General Obligation Refunding Bonds (SIFMA Index Bonds) 2010 Series A
    • The Commonwealth priced $538.12 million of SIFMA Index Bonds maturing on February 1 in 2011, 2012, 2013 and 2014. The rates reset weekly with monthly interest payments at a weighted average fixed spread to weekly SIFMA of 25.3 bps
    • The Bonds secured ratings of Aa2, AA, AA from Moody's, S&P and Fitch
      • In it's report, Moody's called the refunding using SIFMA Index Bonds a "credit positive", citing no bank counterparty risk, no liquidity replacement risk and diversification of the Commonwealth's debt portfolio
    • The bid-to-cover ratio, which is a measure of demand, was strong. The Commonwealth received over $2.5 billion of orders with 20+ fund families placing orders, including several for entire maturities
    • Fixed spreads to SIFMA were reduced in each maturity by 3 to 7 basis points during pricing
    • The Bonds were issued to refund the 2005 Series A VRDBs in lieu of substantially higher bank liquidity (Standby Bond Purchase Agreement) replacement costs
    • The Commonwealth achieved $7.5 million of total cash flow savings or 65 basis points on an on-going basis versus a VRDBs, which require bank liquidity facilities

  • December 1st - $956.45 million General Obligation Bonds, 2009 Series E (Federally Taxable - Build America Bonds - Direct Pay to Issuer)
    • Took advantage of the new federally authorized Build America Bond program to provide nearly all of the Commonwealth's 20 to 30 year maturity borrowing needs over the next three years
    • All-in cost of borrowing (net of the 35% federal subsidy on the interest costs) was a very low 3.57%, the lowest borrowing rate for the a fixed-rate transaction in Commonwealth history
    • Achieved savings versus selling bonds as traditional tax-exempt securities of $247 million on a gross dollar savings basis, or approximately $172 million on a present value basis (18% of par)
    • Extensive pre-sale marketing and investor outreach program over two week period led to very strong demand, allowing the Commonwealth to enhance the size of the offering while simultaneously lowering the bond yield (thus lowering borrowing costs) to investors. Thirty-year bonds were sold at a spread of 120 basis points off of 30-year Treasuries, comparable to 'AAA' rated issuers
    • Orders for bonds came from nearly 60 separate accounts, transaction was initially 2x oversubscribed

Fiscal 2009

The Commonwealth has entered the municipal market four times in Fiscal 2009 with long-term financings, three of which were for new-money purposes

The success of the sales has been driven in large-part by the demand generated by retail investors.

  • May 20th - $628.44 million General Obligation Bonds, 2009 Series B, C & D
    • Despite the lower absolute level of yields, the Commonwealth successfully sold $378 million during a 1 ½ day retail-only order period, equal to 60% of the total tax-exempt bonds sold (both negotiated and competitive)
    • Successfully completed two competitive bond auctions to institutional investors
    • All-in tax-exempt cost of borrowing was 3.96%, the lowest average borrowing cost for a fixed-rate transaction that the Commonwealth has ever had

  • February 19th - $525 million General Obligation Bonds, 2009 Series A
    • With volatility continuing in both the taxable and tax-exempt markets, the Commonwealth successfully replaced BANs sold in December 2008 when long-term rates were very high
    • Sold more than $205 million in bonds to individual investors, equal to nearly 40% of the total deal
    • All-in cost of borrowing was a low 4.25%

  • November 19th - $544.29 million General Obligation Refunding Bonds, 2008 Series A
    • Over $300 million of the $544.29 million offering was placed in the hands of retail investors
    • The all-in cost of the borrowing was approximately 4.61%

  • September 4th - $652.79 million General Obligation Bonds, Consolidated Loan of 2008, Series A
    • Opportunistically accessed the market one week before market events drove interest rates drastically higher
    • Sold more than $311 million in bonds to individual investors during an early retail-only order period
    • All-in cost of borrowing was a low 4.24%

During a period of unprecedented volatility in the market, the Commonwealth prudently utilized the strength of its credit to maximize the benefit of investors' flight to quality by entering the tax-exempt market when other issuers could not.


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Last Updated: 5/11/2010

Disclaimer: The information is provided for quick reference only and is not an exhaustive compilation of information for any particular bond issue. It does not purport to present full and fair disclosure with respect to Commonwealth of Massachusetts debt within the meaning of applicable securities laws.