The city of New Orleans sold its first bonds in two years on Wednesday, a $40 million issue to Morgan Keegan & Co., with the proceeds slated for local street projects.
The Board of Liquidation, City Debt voted to sell to Morgan Keegan, because it offered the city the lowest true interest cost with a projected average rate of 5.4 percent over the debt's life. It was brought that low under terms of the so-called Build America Bonds which dictate the federal government also pays a share of interest.
The sale drew three bidders total, though only Morgan Keegan for Build America Bonds. Two others submitted offers to buy the bonds as tax-exempt _ without a federal crutch for the city.
In late 2007, the city sold the first $75 million in bonds from a $260 million issue approved by voters before Hurricane Katrina for road, public infrastructure and other work.
A second sale, for $80 million, had been set for last year, but the board postponed it due to poor market conditions and a below-investment grade rating the city still held from Standard & Poor's.
While the city succeeded in boosting its rating earlier this year, the rating remains at the low end of investment grade and the board opted to cut the $80 million in two sales to make it more palatable to the market.
In spite of the still-unsteady market and tourist-reliant city's own financial woes, blamed in part on lower-than-expected sales tax revenues due the U.S. recession, several board members considered Wednesday's showing a success. Plans tentatively call for another $40 million sale in the second half of 2010.