Vermont bond bank increases retail push

The Vermont Municipal Bond Bank is expanding its individual investor outreach ahead of this week's bond sale.

The agency announced Friday that more financial institutions will have direct access to its local investment bonds, which were first offered in February in increments as low as $1,000 through the underwriting syndicate of Morgan Stanley and Citigroup. The selling group for the $31.2 million deal slated for Tuesday features Fidelity, Neighborly, 280 Securities, UBS, Stifel and Baird. Morgan Stanley is the book-running senior manager with Citi serving as co-manager.

“We’re trying tactically to use the selling group to help with the conversion of younger and first time buyers, which we found to be attracted to the Local Investment Bond designation, but did not necessarily have a traditional financial advisor," said Michael Gaughan, who became the bond bank’s executive director in January. “Our hope is that the web-based platform of many of the selling group members will make the process of buying Bond Bank munis a little less intimidating for new buyers.”

Gaughan, a former public finance director at PNC Capital Markets, said many of the new organizations were selected based on their strong web-based platforms. Morgan Stanley and Citi will lead Tuesday’s deal after spearheading a Feb. 12 $8.2 million series 1 bond sale for capital projects throughout Vermont.

“Our core team is experienced and tested,” Vermont Municipal Bond Bank board chair David Kimel said in a statement.

The bond bank will use proceeds from Tuesday’s transaction for loans to 17 local governments for capital purchases and infrastructure improvements. The deal has ratings of AA-plus by S&P Global Ratings and Aa1 by Moody’s Investors Service.

Gaughan said the bond bank’s engagement with investors has bucked a national trend of declining participation. He said Vermont retail investors typically account for about one-third of all sales in the bond bank’s offerings. The new local investment bonds are similar to the state of Vermont’s citizen bonds, which are available only to Vermont residents, also in $1,000 denominations.

“The expansion of access to our bonds will allow the Bond Bank to build on the long tradition of support we’ve received from individuals throughout the state,” said Gaughan. “We believe the additions will help facilitate a locally based ‘farm team’ of new participants that will invest for years to come.”