Building American borrowers Race countdown clock before year-end

From California to New York, issuers are rushing to take advantage of Build America grant by accelerating sales of bonds values before the program ends.

States and municipalities were set up to sell more than $ 3 billion of securities next week. In Chicago, San Francisco, Los Angeles and New York state, said that issuers who are running in the market before the program expires on December 31 in the absence of an extension.

"We were trying to beat the clock, so the fast track to leverage funding," said Charles Perl, assistant financial director of the San Francisco Public Utilities Commission yesterday. The district rose 350 million U.S. dollars provided for Building America's debt sale next week, months ahead of its previous schedule, said yesterday in an interview.

The U.S. government pays 35 percent of the cost of interest on the bonds to help communities build roads, bridges and other infrastructure. The securities pay interest expense, making them similar to corporate debt and attractive to a larger market compared to tax-exempt municipal bonds. The program began as part of a package of President Barack Obama economic stimulus to boost public works projects by a reduction in borrowing costs.

An agreement between Obama and Republican congressional leaders this week to keep tax rates of increase will extend the Build America program, if approved in the form of a Senate measure that was formed on 9 December. That leaves emitting less than three weeks to make the cost savings allowance before it disappears in new indebtedness.

Continuing Need

"The need does not go away for us," says Perl. "If it ends, we will return to the tax-exempt financing that we have always done."

After the sale next week, San Francisco Perl committee has raised about half of the 4.5 billion dollars needed to improve water system, "he said.

More than 179 billion U.S. dollars Manufacturing of America Securities have been sold since April 2009 when the program began, making the fastest growing segment of the market 2.86 trillion U.S. dollars of municipal bonds. The issuers have sold 37.2 billion U.S. dollars of debt only in California, USA most populous state, according to state Treasurer Bill Lockyer.

Officials from the Water Authority of Monroe County, northwest of New York, on Lake Ontario, the plan to issue 90.7 million U.S. dollars in building values of America next week. Selling accelerated for release before the end of the program, said Nicholas Noce, acting executive director of the authority.

Expedited Sale

"We had planned to subject before, but it does speed up the process to take advantage of the subsidy," Noce said yesterday in a telephone interview. "Insurers have all worked hard and worked a few hours to put this business in the market and take advantage of the maximum grant."

In Illinois, the Water Reclamation District of Greater Chicago Metropolitan ran "a little" to the offer of $ 400 million in building America's debt next week, said Harold Downs, treasurer of the district. Said he was not happy with time.

"The market is terrible," Downs said in a telephone interview yesterday.

The average yield of generation of American securities rose to a 11-month high of 6.37 percent this week as investors demanded a higher premium to buy municipal debt, according to an index of Wells Fargo. The yield on the benchmark 30-year Treasury hit 4.50 percent this week, the highest since May.

Saved $ 118 million

The Chicago district values America used to generate a $ 600 million in August 2009 to help finance the $ 2.7 billion, five-year rehabilitation of sewer lines, said Downs. He said the district saved about 118 million U.S. dollars through the program, reduce the effective interest rate on the $ 600 million to 3.72 percent, compared with 4.88 percent prevailing market duty-free the time.

If the Build America program is not renewed, Downs said the district could sell tax-exempt bonds.

"Of course, if the program is renewed, we note that the next time too," he said.

In Los Angeles, the Metropolitan Water District of Southern California plans to offer $ 250 million in building the values of America, as soon as next week. The theme was originally created to go to market next March, said Brian Thomas, the district chief financial officer.

The possibility of extending the program by the Congress played an important role in the original program, Thomas said yesterday.

Renewal was expected

"We had expected to be renewed in one way or another, but when that time began to decline, we are ready to go," said Thomas.

After the planned issuance, the district has funded approximately 600 million $ 1.8 billion, the capital improvement plan five years, said Thomas.

The district fund projects through a combination of income and tax-exempt debt in the absence of the subsidy program, said Thomas.

"I think it highly unlikely that they will not allow a grant in the future," Noce said Monroe's perspective, whether for an extension of the current or subsequent rebirth.