(Raleigh, N.C.) – State Treasurer Dale R. Folwell, CPA today announced the pricing of $132.025 million worth of State of North Carolina limited obligation refunding bonds (LOBs). The LOBs true interest cost is .7% representing a net present value savings of $23.6 million and is the lowest interest rate ever obtained by the state for a LOB. The bonds are scheduled to close on August 5, 2021.
The ratings on the bonds are:
Moody’s Investor Services Aa1
S&P Global AA+
Fitch Ratings AA+
Because LOBs are appropriation bonds, they are considered to carry slightly more risk and are, subsequently, given lower ratings than general obligation (GO) bonds. Appropriation bonds are so named because the money used to make payments on the debt comes from an appropriation passed by the legislature with the state making no promise to make payments on the bonds in the absence of an appropriation. In contrast, GO bonds are backed by the full faith, credit, and taxing authority of the state.
“This is an unbelievable rate and the staff at the State and Local Finance Division deserve all the credit for an incredible ‘job well done,’” Treasurer Folwell said. “Getting the lowest possible rate is so important because it makes money available for public education, public safety, public roads and the other core functions of government.”
In the same rating reports, the three major rating agencies reaffirmed the state’s triple “AAA” bond rating for GO bonds saying:
S&P Global Ratings: Historically strong economic growth trends supported by diverse employment sectors; a history of prudent fiscal management including making difficult budget decisions to restore fiscal balance when necessary, as well as managing surpluses when they occur, to retain structural budget balance.
Moody’s Investors Service: the state has had biennial budget impasses several times over the past six years, including the current biennium, but strong governance structures in place insure continued conservative fiscal practices and healthy reserves.
Fitch Ratings: low liabilities, strong financial controls and long-term prospects for continued economic expansion and diversification. The state's rainy-day fund and other reserves provide a source of financial flexibility, although the rainy-day fund has been drawn upon to address non-financial emergencies. The state is well positioned to emerge from the financial challenges associated with the coronavirus economic disruption.
GO Ratings:
FITCH: AAA
MOODY’S: Aaa
S&P: AAA
The N.C. Department of State Treasurer’s State and Local Government Finance Division handles the sale and delivery of all state and local debt and monitors the repayment of state and local government debt.
More information can be found at State and Local Government Finance Division.
State Treasurer of North Carolina Dale R. Folwell, CPA (left)
Lewis Andrews – Senior Debt Analyst at North Carolina Department of State Treasurer (right)
Treasurer Folwell and Sr. Debt Analyst Lewis Andrews Receive News of Record Low Interest Rate for Bonds