The State of Alaska is continuing the process to sell up to $3.3 billion in pension obligation bonds after receiving mixed reviews from the major credit rating agencies.<\/p>\n
On Friday, S&P Global Ratings placed the state on CreditWatch with negative implications and rated the state\u2019s appropriation-backed bonds, such as the pension bonds, as AA-.<\/p>\n
The agency indicated in a brief that it would likely lower the state\u2019s general obligation credit rating from AA+ to AA if the bonds were sold.<\/p>\n
Appropriation-contingent bonds are often rated at least one notch lower than general obligation debt.<\/p>\n
\u201cThe CreditWatch action reflects our view that Alaska\u2019s credit profile would incrementally weaken following the issuance of the proposed $3.3 billion (in) pension obligation bonds,\u201d S&P analyst Gabriel Petek said in a release.<\/p>\n
Also on Friday, Moody\u2019s Investors Service rated the bonds at Aa3, a rating equivalent to AA-. Fitch ratings gave the potential bond sale an AA rating. Fitch and Moody\u2019s did not indicate they would lower the state\u2019s general obligation rating if the bonds are sold.<\/p>\n
Revenue Commissioner Randy Hoffbeck described the prospective bond sale as a \u201ctrigger\u201d that would just move up the timing of a potential downgrade.<\/p>\n
S&P removed Alaska from its CreditWatch list in August after Gov. Bill Walker vetoed nearly $1.3 billion from the state\u2019s operating budget in an effort to reconcile a $3.2 billion budget deficit.<\/p>\n
State Revenue officials are looking to sell between $2.3 billion and $3.3 billion in bonds to help fund the state\u2019s $24.5 billion Public Employee and Teachers\u2019 Retirement systems.<\/p>\n
The deal could potentially help the state take advantage of low interest rates if investment returns on the bond revenue exceed the interest rate they are sold.<\/p>\n
According to Hoffbeck, the state likely won\u2019t sell the bonds if the interest rate on them exceeds 4 percent, while the state\u2019s retirement fund investors aim for 8 percent long-term returns.<\/p>\n
Hoffbeck said the agency opinions are slightly better than the state was expecting, so the Revenue Department will go ahead with a three-week worldwide marketing effort to sell the bonds, which are expected to be priced on Oct. 26.<\/p>\n
\u201cWe actually thought we were going to be AA- across the board, so we actually ended up on the bonds with a little better rating than we thought we were going to end up with,\u201d Hoffbeck said.<\/p>\n
\u201cIf we can bring in the sale under 4 percent, then we\u2019ll take it all back to the governor and say, \u2018Here\u2019s the risk, we\u2019ve got S&P saying they\u2019re going to downgrade us. Here\u2019s the benefits,\u2019 and let the governor give it a thumbs up or a thumbs down.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
The State of Alaska is continuing the process to sell up to $3.3 billion in pension obligation bonds after receiving mixed reviews from the major credit rating agencies. On Friday, […]<\/p>\n","protected":false},"author":83,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[4],"tags":[216],"class_list":["post-12360","post","type-post","status-publish","format-standard","hentry","category-news","tag-state-government"],"yoast_head":"\n