Hedge Funds Can't Chase Risk in Hometown as Greenwich Sells Debtby
Connecticut's wealthy enclave sets limits on borrowing plans
Town's deal priced at lower yields than benchmark AAA debt
Greenwich, Connecticut, may be home to hedge-fund managers who chase risk in search of billion-dollar payoffs, but the town’s annual offering to the municipal-debt market is as safe as they come: AAA rated bonds, all backed by property taxes.
The community of 62,000, with top grades from the three largest credit-rating companies, issued $60 million of tax-free notes and $50 million of general obligations Thursday, data compiled by Bloomberg show. Five-year securities priced to yield 1.02 percent, below the 1.13 percent yield on an index of AAA munis. The bulk of proceeds will fund an auditorium at Greenwich High School and a firehouse, Peter Mynarski, Greenwich’s comptroller, said in an interview.
Greenwich’s $130.4 million of long-term debt is about 5 percent of its legal limit, showing how the home of hedge funds AQR Capital Management, Viking Global Investors LP and Lone Pine Capital has limited borrowing even with yields near generational lows. It instead pays for projects when the need arises, thanks to a median family income of $175,509, twice the Connecticut average.
“The town is not going to go out of its way to have that debt go up by over-borrowing,” Mynarski said. “We have a hybrid system where we bond and we pay immediately for capital projects. The town basically funds everything that it wants to.”
Greenwich, the closest Connecticut town to New York City, brought in almost $339 million in property tax revenue in 2015, with the value of new homes ranging from $200,000 to $26 million, according to bond documents. The average list price is about $2 million.
About one-fourth of Greenwich employment is in finance and related fields. Almost half of all families make more than $200,000 a year, compared with 12.7 percent for Connecticut as a whole, offering documents show. The value of all property within the town, including real estate, motor vehicles and other personal property, is $31.1 billion, about $500,000 for every man, woman and child.
“Its natural beauty, attractive Long Island Sound setting, water recreational opportunities, and closeness to the New York metropolitan center have historically made this regional location an appealing choice for some of the wealthiest people in the country,” according to the offering statement.
Greenwich issued five-year debt a year ago that was priced to yield 1 percent, below the 1.13 percent yield at the time on the Bloomberg index of AAA munis due in five years. Like this week’s sale, it signals that investors viewed the securities as safer than other top-rated bonds.