In the midst of the COVID-19 pandemic, South Carolina is coming to market with $182.355 million of high-quality tax-exempt general obligation bonds. The state will competitively sell the GOs in three separate offerings of refundings and new money on Wednesday.
South Carolina GOs have been trading about three basis points above Refinitiv Municipal Market Data’s 5% AAA muni scale. On Thursday, the state 10-year GOs were at 0.78% (MMD at 0.75%), while the 30-year GOs were at 1.46% (MMD at 1.43%).
“Certainly, the last 10 months have been very challenging for our state, and I am very pleased that South Carolina was able to maintain our strong credit ratings. We are fortunate that our leadership has embraced fiscally conservative financial management that has fostered continued economic growth and supported a build-up of our state’s cash reserves,” said South Carolina Treasurer Curtis Loftis.
Ahead of the deal, Moody’s Investors Service and Fitch Ratings affirmed the Palmetto State’s triple-A ratings, acknowledging the state’s continued sound financial management in the midst of a global pandemic. S&P Global Ratings affirmed South Carolina’s AA-plus rating. All three rating agencies assign stable rating outlooks.
As of Jan. 1, over 308,000 South Carolina residents had been diagnosed with COVID-19 and 5,296 died, according to a six page notice about the pandemic’s economic effects contained in the preliminary official statement.
Staff in the Office of the State Treasurer assessed the potential net present value savings of each issuance, both in terms of dollar amounts and by percentage as part of the annual review of the state’s existing bond portfolio. It identified several callable bonds as good candidates for refunding as well as some possibilities for higher education funding.
Broken down, the sales consist of $88.615 million of Series 2021 A, B, C, D & E GO new money state institution bonds for five colleges and universities, $84.655 million of Series 2021A GO state economic development refunding bonds and $9.085 million of Series 2021 A GO state transportation infrastructure refunding bonds.
Public Resources Advisory Group is the financial advisor, Haynsworth Sinkler Boyd is the bond counsel, Howell Linkous & Nettles is the disclosure counsel and U.S. Bank is the paying agent.
South Carolina is one of only 14 states that are rated in the top category by Moody’s.
“We have weathered the financial impacts of the COVID-19 pandemic better than many states, and these strong credit ratings will allow us to borrow money less expensively in this time of historically low rates,” Loftis said.
The state last sold comparable GOs on May 2, 2019, when BNY Mellon Capital Markets won $9.9 million of Series 2019A GO state institution bonds issued on behalf of Clemson University with a true interest cost of 2.5182%.
Before that, the state was in the competitive arena on Aug. 24, 2017, when it sold $121 million of Series 2017A GO state institution bonds for Clemson. Morgan Stanley won those bonds with a TIC of 2.4450%.
Since 2010, the state has sold over $2 billion of debt, with the most issuance occurring in 2010 when it issued $624 million. It was not in the market in 2018 or 2020.
In November 2020, the South Carolina Board of Economic Advisors reduced its revenue estimate for the state’s fiscal 2020-2021 budget, down $803.7 million since its February 2020 report, due to the impact of COVID-19. The BEA will revise its forecast again next month.
However, the BEA noted there was resiliency in the state’s economy.
“South Carolina is positioned to recover quicker from the effects of the COVID-19 pandemic than the rest of the nation," it said. "To date, South Carolina has recovered 70% of its COVID-19-related job losses, but the remaining jobs are expected to return slowly.”
