N.Y. Power Authority: To Refund
$72.1 Million in Auction Rate Securities
June 24, 2008
FOR IMMEDIATE RELEASE
MASSENA—The Trustees of the New York Power
Authority (NYPA) authorized Tuesday the issuance of tax-exempt
commercial paper notes to refund $72.1 million of its debt
previously issued as Auction Rate Securities (ARS).
“The Power Authority carefully manages its debt for
the benefit of our customers and for the protection of our
bondholders,” said Roger B. Kelley, NYPA president and chief
executive officer. “Today’s action will allow us to continue to
achieve our core mission of creating and transmitting low-cost power
that serves governmental agencies, businesses, non-profits and
communities across New York State.”
In August 2000, NYPA issued Subordinate Revenue
Bonds in four separate series. Series 1 and Series 2 have been
retired. Series 3 and Series 4 were issued as ARS in a total
principal amount of $80 million, of which $72.1 million is
outstanding. The proceeds of Series 3 and 4 were used for
construction of NYPA’s 500-mw Combined-Cycle Power Plant, in
Astoria, which began operations at the end of 2005 for the benefit
of NYPA’s New York City Governmental Customers.
Beginning this past February, demand in the ARS
market began to wane. On Feb. 13, NYPA’s Series 4 ARS experienced a
failed auction, which was the first-ever ARS failure for the Power
Authority. Since then, both the Series 3 and 4 ARS have continued
to experience failed auctions. The failed auction rate is higher
than the equivalent tax-exempt commercial paper rate. By refunding
the ARS with tax-exempt commercial paper, NYPA expects to reduce its
interest expense while also exiting the deteriorating ARS market.
To refund the Series 3 and 4 ARS, the Power
Authority will use Series 2 of its Tax-Exempt Commercial Paper which
was authorized by the NYPA trustees in 1997 for up to the maximum
amount of $300 million and subsequently increased to a maximum
amount of $450 million. Currently, just under $250 million of
Series 2 Notes are outstanding.
In another action related to NYPA’s debt, the Power
Authority Trustees today approved expanded authorization limits for
two of the Authority’s commercial paper marketing agents. In early
May 2008, UBS, one of NYPA’s marketing agents for tax-exempt
commercial paper notes, announced it will be exiting the
institutional municipal securities business. UBS was authorized for
up to $175 million and was currently marketing $105.3 million in
Series 2 Tax-Exempt Commercial Paper that is scheduled to be
remarketed beginning July 1. As a result the Series 2 Tax-Exempt
Notes assigned to UBS, are being redistributed to two other
authorized dealers, Citigroup and JPMorgan Securities Inc.
Citigroup is now authorized to market up to $100
million in Tax-Exempt Notes for an increase from $50 million and it
currently has about $40 million outstanding. JPMorgan Securities
Inc. is also now authorized to market up to $100 million, increased
from $50 million with no outstanding issues. The third authorized
dealer for NYPA’s Series 2 Tax-Exempt Commercial Paper program is
Goldman Sachs & Co., which is authorized for up to $175 million and
has issued $100.5 million to date.
The increase in the amounts of Series 2 Tax-Exempt
Notes that Citigroup and JPMorgan Securities Inc. may market, along
with the Series 2 Notes Goldman Sachs may market, will enable the
Authority to redistribute the Series 2 Notes currently marketed by
UBS and refund the outstanding Series 3 and 4 ARS.
The effect of refunding the ARS with Series 2
Tax-Exempt Commercial Notes is expected to reduce NYPA’s monthly
expenses by about $73,000.
Financial data and information are provided for
general informational purposes only, and are not intended for making
any investment or financial decisions. NYPA shall not be liable for
any errors or delays in the data or information.
■ NYPA uses no tax money or state
credit. It finances its operations through the sale of bonds and
revenues earned in large part through sales of electricity. ■
NYPA is a leader in promoting energy efficiency, new energy
technologies and electric transportation initiatives. ■ It is
the nation’s largest state-owned electric utility, with 18
generating facilities in various parts of the state and more than
1,400 circuit-miles of transmission lines. ■ For more
information, please go to www.nypa.gov.
Return to Press Center