Memphis, Tennessee, issued $135.3 million in bonds to refund previously issued securities.
The bonds mature between 2025 and 2044, yielding between 2.91% and 3.63%. They pay interest at 5%. The securities received a rating of Aa2 from Moody’s Investors Service and AA from S&P Global Ratings.
“The Aa2 issuer rating reflects the city’s healthy reserves that will remain in excess of 25% of revenue despite a projected operating deficit in fiscal 2024,” Moody’s analysts wrote.
Memphis is facing a deficit of around $60 million. Next year it will increase property taxes, as well as vehicle registration and trash collection fees, to compensate for the budgetary shortcoming.
The city will use the issuance proceeds to refund commercial paper notes.
Moody’s expects that leverage will continue to grow in the coming years, but does not anticipate that it will exceed 250% of revenue.
Memphis is the second-largest city in Tennessee, with a population of 630,000 people. The bonds are direct obligations of the city, backed by its full faith and credit.
BofA Securities, Inc served as underwriter on the issuance, purchasing the bonds for $150.6 million. The price reflected a premium of more than $15 million. PFM Financial Advisors LLC and CLB Porter LLC acted as municipal advisors.