Kentucky gambles and wins on Wall Street
When the history of the current national financial crisis is written, Kentucky may emerge as something of a pioneer in (of all things) the Wall Street bond market.
At the same time, the state may have gotten a good deal for the taxpayers.
“On Oct. 7, Kentucky sold $400 million worth of bonds to finance education and public works projects around the state,” reports Time.com, the Internet version of Time magazine.
“It was one of the first major (bond) issues since the Federal Government started taking one unprecedented step after another to try to jolt lending back to life.”
State officials were “really worried,” Jonathan Miller, the state’s secretary for finance and administration, told Time. “We had encountered a lot of pessimism and skepticism that we’d be able to sell these bonds.”
But the buyers came and the Kentucky bonds were sold. After seeing Kentucky’s success, Ohio and other states jumped in and the market moved toward business-as-usual.
About $30 million of the Kentucky bond issue will pay for construction at the Kentucky Horse Park that will benefit the Alltech FEI World Equestrian Games and other horse-related events, Miller told Games organizers on Thursday.
Kentucky will pay 5.49 percent interest on the bonds, which is about 60 basis points (100 basis points equals 1 percentage point) higher than for a similar bond issue in May. It is also 10 to 20 basis points lower than state officials expected to pay, said Jill Midkiff, spokeswoman for Gov. Steve Beshear.
“The market has deteriorated substantially since then,” Midkiff said. New York City sold bonds on Thursday for 6.40 percent. “As you can see, we were lucky enough to slip into the market at a very opportune time.”
Sometimes it pays to be a pioneer.
