New York City, among the biggest borrowers in the $3.9 trillion US municipal bond market, cut Goldman Sachs Group Inc. from the ranks of those who underwrite a big chunk of its debt.
The firm will no longer be part of the pool of underwriters who sell its senior general-obligation bonds and debt issues for the Transitional Finance Authority as part of its periodic reshuffling of bankers, New York City said on Aug. 7.
While Goldman Sachs isn’t a major banker to states and local governments when it comes to more mundane bond deals, the decision means that the firm will miss out on billions of dollars of bond sales over the next few years.
New York City, which had to close a $8.3 billion budget deficit in the fiscal year that began July 1 as revenue plummeted and coronavirus related spending increased, plans to issue about $39 billion of general obligation bonds and Transitional Finance Authority debt in the next four fiscal years, according the city’s financial plan. The Transitional Finance Authority was created in 1997 to circumvent limits on New York City general-obligation bond sales and the authority’s debt is backed by the city’s income tax, and if needed, its sales tax.
Such deals aren’t a major focus of Goldman Sach’s municipal bond business. Instead, the bank focuses more on specialized deals like a $1.1 billion issue of unrated bonds to finance American Dream, the long-stalled shopping and entertainment center in New Jersey’s Meadowlands, as well as public utilities offerings by issuers like the Long Island Power Authority.
Goldman ranks eighth among muni bond underwriters this year, just below Piper Sandler & Co., a regional investment bank based in Minneapolis.
The underwriters were selected in a “competitive process” by the city’s Office of Management and Budget and the Comptroller’s Office, said Hazel Crampton-Hays, a spokesperson for comptroller Scott Stringer.
“OMB and the Comptroller’s Office determined that the interests of the City and its related issuers are best served by the announced underwriting assignments,” Hays said. Nicole Sharp, a spokesperson for Goldman Sachs, declined to comment. Laura Feyer, a spokesperson for New York City Mayor Bill de Blasio didn’t respond to a request for comment.
The city’s senior GO and TFA bond managers include Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Jefferies Financial Group Inc., Loop Capital Markets LLC, Samuel A. Ramirez & Co., Royal Bank of Canada, Siebert Williams Shank & Co., LLC and Wells Fargo & Co.
New York also selected Barclays Plc, Loop, Raymond James Financial Inc. and Siebert to serve as senior managers for bonds issued by the city’s Municipal Water Finance Authority. Goldman can compete for a senior manager role on New York Water bond issues following deals managed by the four other firms, the city said in a statement.
One-third of GO and TFA senior bankers and 40 percent of New York Water’s senior managers are minority and women-owned businesses, the city said.