Bonds

New York City will dip its toes into the social bond municipal market for the first time next month when it offers a $400 million taxable general obligation deal to a growing investor base seeking bonds that address specific social objectives.

This is the city’s first sale of social bonds, Mayor Eric Adams and New York City Comptroller Brad Lander said Tuesday.

Citigroup and Morgan Stanley as joint lead managers are expected to price the deal on Tuesday, Oct. 4.

On the same day, the city will sell $950 million of tax-exempt fixed-rate bonds after a one-day retail order period on Monday, Oct. 3.

The tax-exempts will be priced by book-running lead manager Citigroup, with BofA Securities, J.P. Morgan Securities, Jefferies, Loop Capital Markets, Ramirez & Co., RBC Capital Markets, Siebert Williams Shank and Wells Fargo Securities as co-senior managers.

S&P Global Ratings said the taxables are aligned with the International Capital Market Association Social Bond Principles, which support projects that fund affordable housing and socioeconomic advancement and empowerment, according to the mayor’s office. City officials claim the S&P opinion is one of the strongest the agency has issued to date for a social bond issue, assigning grades of “advanced” for use of proceeds and project selection and evaluation.

Proceeds from the sale of the social bonds will go to supporting more than 3,000 units of affordable housing under the mayor’s “Housing Our Neighbors: A Blueprint for Housing and Homelessness“ plan.

The city said the social bond issuance will deepen its investor base by addressing growing demandfor such securities. As taxable paper, the issue is also expected to appeal to non-traditional buyers of municipal bonds, such as pension funds, corporate bond buyers and asset managers.

In 2021, investors bought about $464 billion of new issue municipal ESG bonds, according to an S&P report, up 71% from 2020.

moSince 2018, approximately $36 billion of municipal bonds designated as social bonds have been issued, with more than 68% designated for affordable housing, the city said.

“Increasing the supply of genuinely affordable housing is both a critical priority for the City of New York and an attractive investment for socially conscious investors,” Lander said in a statement.

Taxable proceeds will finance projects under the New York City Department of Housing Preservation and Development’s Extremely Low- and Low-Income Affordability program, Supportive Housing Loan Program and Senior Affordable Rental Apartments program.

The financed projects will provide roughly 2,452 homes under the ELLA program, 682 homes under the SHLP program and 153 homes under the SARA program.

More than 70% of the units will be for households making 60% or less of area median income ($72,060 for a family of three), and 909 of the homes will provide permanent housing for people and families formerly experiencing homelessness.

All of the projects financed are new construction and must comply with the Enterprise Green Communities Criteria or the New York City Overlay to the EGCC or pursue Leadership in Energy and Environmental Design v4 gold or platinum certification. 

New York City is one of the biggest issuers of municipal bonds in the nation. As of the first quarter of fiscal 2022, the city had about $38.13 billion of general obligation bonds outstanding.

The city’s GO bonds are rated Aa2 by Moody’s Investors Service, AA by S&P Global Ratings, AA-minus by Fitch Ratings and AA-plus by Kroll Bond Rating Agency. Fitch assigns a positive outlook to the city while Moody’s S&P and Kroll assign stable outlooks to the credit.