HawaiiWritten by Havre On 22 October 2012
City & County of Honolulu To Float $890 Million In GO Bonds

The City & County of Honolulu will be selling $890 million in General Obligation Bonds this week to fund various capital improvement projects. A large portion will be used to refinance existing debt, taking advantage of a good bond rating and lower interest rates, ultimately reducing debt service costs.

General Obligation Bonds (GO) ratings are based on the full faith and credit of the City & County, as opposed to Revenue Bonds (like the recent Sewer Bonds) ratings, which are based on the ability of the rate payers to service the debt.

Fitch has rated the GOs at AA+ and Moody’s are at Aa1, the second highest rating for municipal bonds. Moody’s said, “The Aa1 rating primarily reflects the city’s large economic base, above average resident wealth, and sound financial operations with recently improved reserve levels, as well as manageable debt profile.”

Fitch adds, “Honolulu’s economy benefits from a resilient visitor industry that has maintained strength throughout periodic downturns … The city’s non-tourism economy is also substantial and balances tourism’s inherent volatility,” showing how the military presence — more importantly their spending — truly benefits Hawaii’s economy.

As is somewhat of a tradition going back to Governor John Waihee’s time with State Bonds, the City & County is offering first crack at the securities to residents of Hawaii. Those interested should check with their respected broker. In most cases, the bond interest is free from state and federal taxes. Bank of America Merrill Lynch is running the issues with Piper Jaffray as the co-manager.

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About Author


Randy Havre has a wealth of experience in the financial industry. In 1987, he established his own full-service stock brokerage firm, which was also registered with the SEC as an Investment Advisory Firm, managing money for the State of Hawaii’s pension fund, among other portfolios. In 1994, he started his first of three Hawaii based Venture Capital Funds. Additionally, he wrote a weekly stock column in the Pacific Business News for 21 years, taught Finance 315 Portfolio Management and Investment Strategies at the University of Hawaii for five years and is on KHON’s Morning News as a business/financial analysis twice weekly. Over the past nine years, Havre has been active in South America doing business development work for some of his portfolio companies, mentoring entrepreneurs and advising investors.

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Randy Havre
Randy Havre

The City & County was able to sell over $900 million at an interest rate of 3.2%, record low. Bid to cover was 3 to 1. About $625 million was refi's with the lower rate saving about $75 million over the term.