The Town of Oyster Bay, N.Y. is getting a cool reception from the municipal bond market after Moody's Investors Service withdrew its rating citing a lack of financial information.
Oyster Bay's $99.1 million in tax-exempt bond anticipation notes priced in junk territory Friday, with a 1.75% yield, only two days after Moody's announced it was withdrawing the Long Island town's rating because of not providing 2014 audited financial statements.
The general obligation BANs, Series 2016A mature on Feb. 3, 2017 and is part of $121.8 million in short-term debt New York's fourth largest township borrowed Friday.
The negotiated transaction was underwritten by TD Securities with Norton Rose as bond counsel.
Friday's note pricing came hours after Standard & Poor's placed Oyster Bay's BBB long-term bond rating on credit watch negative citing "an estimated deterioration in the town's operating performance and available reserves." Oyster Bay officials disclosed to S&P that it closed 2014 with a $17 million operating deficit and a total shortfall of $25 million.
Matt Fabian, a partner at Concord, Mass.-based Municipal Market Analytics, said Monday morning he was not surprised at the high yield Oyster Bay paid following Moody's rating withdrawal and the negative report from S&P.
"Issuers with increased liquidity issues are having trouble raising cash in today's muni market," said Fabian. "Bondholders are concerned about near-term liquidity issues."
S&P also warned it would likely withdraw its Oyster Bay rating if the town does not provide the 2014 audited financial statements by the end of March. Oyster Bay Finance Director Rob Darienzo has attributed the delay in reporting the statements to the town modernizing its accounting software.
