Bond banks in Indiana, other states boost sales

Back to TopCommentsE-mailPrintBookmark and Share

State municipal-bond banks in Indiana, Vermont, Maine and New Hampshire plan to issue about $190 million in debt this week, as smaller communities seek to take advantage of 10-year interest rates near a six-week low.

The Indiana Bond Bank plans to sell $29 million this week, with a Raymond James Financial Inc. unit leading the marketing of the negotiated deal. Standard & Poor's rates the debt AA, its third-highest grade, and has a stable outlook on the credit.

The Vermont Municipal Bond Bank sold about $70 million in debt Tuesday, according to data compiled by Bloomberg. The organization created in 1970 was the nation’s first of its sort, set up to help raise funds for cities and towns.

The bank in Vermont has issued almost $123 million in securities this year, up 25 percent from $98.4 million in 2010, all through negotiated sales, according to data compiled by Bloomberg. This week’s deal was led by Citigroup Inc. A similar organization in Maine also will bring more debt to the $2.9 trillion municipal market this year than last, the data show.

“We’re saving a chunk of money for municipalities,” Robert Giroux, the Vermont bank’s executive director, said from his headquarters in Winooski before the latest sale. “This year is just the most active we’ve ever been.”

Yields on top-rated 10-year municipal debt averaged 2.23 percent Tuesday, a Bloomberg Valuation index shows. The index fell to 2.2 percent Nov. 21, the lowest level since Oct. 4.

Bond banks, typically overseen by state officials and gubernatorial appointees, provide access to the municipal-securities market for communities that may lack the resources to conduct their own offering. The organizations in New Hampshire and Indiana sold more debt last year, at $221.2 million and $561 million, respectively, than they have in 2011, the data show.

Indiana's bond bank was created by the General Assembly in 1984 and operates as a self-supporting quasi-government entity. A seven-member board of directors governs the bond bank, which is statutorily led by the state treasurer, which is currently Richard Mourdock. The bond bank is based in Indianapolis.

“Bond banks give you a little more comfort to have a pool rather than individual small towns,” said Howard Cure, director of municipal credit research for Evercore Wealth Management LLC in New York, which manages $2.9 billion of municipal debt. “As an investor, you may be hesitant about a little town in Vermont because of the small size.”

Rural development loans will be paid off using about $43 million raised in the Vermont sale, Giroux said. The loans to cities and towns in the state were from the U.S. Department of Agriculture, he said. The move will cut present-value costs by about 5 percent, he said.

S&P rates the Vermont bank’s bonds AA, its third-highest grade, and has a stable outlook on the credit.

New Hampshire’s municipal-bond bank plans to raise almost $36 million through a competitive sale as soon as Wednesday, according to a preliminary offering document. That would bring it to about $129.7 million in debt issued this year, compared with $221.2 million in 2010, data compiled by Bloomberg show.

The Granite State bank usually seeks competitive bids for bond offerings, said Sheila St. Germain, its executive director. The debt is rated Aa3, fourth-highest, with a stable outlook by Moody’s Investors Service.

Maine’s bond bank plans a competitive offering this week, after decades of almost always using negotiated agreements, according to Bloomberg data. State Treasurer Bruce Poliquin took Robert Lenna, the bank’s executive director, to task this year for spending almost $6,000 on a trip with several bank officials to New York in 2010 to close an $80.2 million negotiated sale.

When the banks sell debt, some of the proceeds may be put into reserve funds to provide extra security for investors, Evercore’s Cure said. Such reserves and other provisions help “prop up” the credit of smaller entities that might otherwise be considered riskier, he said.

“As a small town, if something were to happen to a major industry, it could disproportionately hurt your finances,” Cure said. “A lot of the bond bank’s appeal also is the fact that these little issuers can’t rely on municipal-bond insurance very much anymore.”


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. Why not take some time to do some research before traveling to that Indiana town or city, and find the ones that are no smoking either inside, or have a patio? People like yourself are just being selfish, and unnecessarily trying to take away all indoor venues that smokers can enjoy themselves at. Last time I checked, it is still a free country, and businesses do respond to market pressure and will ban smoking, if there's enough demand by customers for it(i.e. Linebacker Lounge in South Bend, and Rack and Helen's in New Haven, IN, outside of Fort Wayne). Indiana law already unnecessarily forced restaurants with a bar area to be no smoking, so why not support those restaurants that were forced to ban smoking against their will? Also, I'm always surprised at the number of bars that chose to ban smoking on their own, in non-ban parts of Indiana I'll sometimes travel into. Whiting, IN(just southeast of Chicago) has at least a few bars that went no smoking on their own accord, and despite no selfish government ban forcing those bars to make that move against their will! I'd much rather have a balance of both smoking and non-smoking bars, rather than a complete bar smoking ban that'll only force more bars to close their doors. And besides IMO, there are much worser things to worry about, than cigarette smoke inside a bar. If you feel a bar is too smoky, then simply walk out and take your business to a different bar!

  2. As other states are realizing the harm in jailing offenders of marijuana...Indiana steps backwards into the script of Reefer Madness. Well...you guys voted for your Gov...up to you to vote him out. Signed, Citizen of Florida...the next state to have medical marijuana.

  3. It's empowering for this niche community to know that they have an advocate on their side in case things go awry. http://www.youtube.com/watch?v=Lrst9VXVKfE

  4. Apparently the settlement over Angie's List "bundling" charges hasn't stopped the practice! My membership is up for renewal, and I'm on my third email trying to get a "basic" membership rather than the "bundled" version they're trying to charge me for. Frustrating!!

  5. Well....as a vendor to both of these builders I guess I have the right to comment. Davis closed his doors with integrity.He paid me every penny he owed me. Estridge,STILL owes me thousands and thousands of dollars. The last few years of my life have been spent working 2 jobs, paying off the suppliers I used to work on Estridge jobs and just struggling to survive. Shame on you Paul...and shame on you IBJ! Maybe you should have contacted the hundreds of vendors that Paul stiffed. I'm sure your "rises from the ashes" spin on reporting would have contained true stories of real people who have struggled to find work and pay of their debts (something that Paul didn't even attempt to do).