Largest 'social' ESG muni deal yet gets a new issue date

BY SourceMedia | MUNICIPAL | 08/11/22 04:48 PM EDT By Thomas Nocera

If all goes according to plan, municipal markets will see the largest ESG bond pricing ever next week as Massachusetts prepares to issue $2.7 billion of taxable business-tax backed special obligation revenue bonds.

The sale of the socially designated bonds was delayed in July as state lawmakers debated a last-minute spending bill that would allocate $300 million of surplus funds to the state unemployment system.

The bond deal will raise capital to pay back $2.2 billion in federal unemployment assistance loans taken during the pandemic and, with the bill targeting the same public program as the bonds, state Treasurer Deborah Goldberg temporarily postponed the sale.

With lawmakers unable to strike an agreement since then, Goldberg reversed course and gave the original deal the go-ahead, confirmed a spokesperson for the treasurer.

The deal is now highlighted on the state's website for bond investors for the week of Aug. 15.

According to documents supplied by Jefferies LLC and BofA Securities, joint book-running senior managers for the deal, the bond structure remains unchanged.

The deal carries ratings of AAA from Fitch Ratings, AAA from the Kroll Bond Rating Agency, and Aa1 from Moody's Investors Service (MCO), and carries ESG certification from Kestrel Verifiers.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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