MEDIA RELEASE

Retail and institutional investors responded favorably to the State of Hawaii’s creditworthiness and financial planning as reflected in the State’s recent bond transaction in New York.

Gov. Neil Abercrombie and Budget & Finance Director Kalbert Young announced Thursday the State successfully sold $1.28 billion of General Obligation Bonds (Bonds) over a week ago.

This latest financial action is the result of the culmination of work by the Abercrombie Administration to restructure its debt and create a solid financial foundation.

Following the transaction, Moody’s Investors Service, Standard & Poor’s Ratings Service and Fitch Ratings affirmed the State’s credit ratings of Aa2/AA/AA.

Standard & Poor’s commented, “Gov. Neil Abercrombie’s willingness to implement aggressive solutions, totaling $1.32 billion, to balance the fiscal 2011-2013 biennial budget in light of a projected budget shortfall.”

Moody’s further cited the State’s “historical fiscal conservatism” because all of Hawaii’s General Obligation debt is issued at a fixed rate, and repayment is relatively rapid with 95% of principal repaid in 15 years. In addition, Fitch affirmed that the State’s “financial management is sound.”

Taking advantage of the market’s lower interest rates, the Bonds also refinanced $488 million in previously issued bonds for economic savings. For the refinanced bonds alone, the cost was refinance to 2.3 percent.

These Bonds will also help the State of Hawaii reduce its annual debt service payments with significant economic savings from the refinancing – over $59 million of present value savings (or 9.65 percent of the refunded principal amount). The total transaction had an interest cost of 3.34 percent.

“A year ago, we inherited a tremendous budget deficit and I made the commitment to get us out of that deep fiscal hole,” Abercrombie said. “My Administration stayed the course by being fiscally disciplined and having clear objectives. We made the tough decisions, and garnered a lot of criticism. Now, one year later, we have turned the corner and investors have taken notice.”

Earlier this year, Abercrombie made the tough decision to use money from the Hurricane Relief and Rainy Day Funds to assist in balancing the budget. The Bond transaction now allows the State to recapitalize those reserves.

“This transaction exemplifies that our actions were, in fact, prudent and beneficial to the State and taxpayers. Because of our hard decisions, the State is in a much stronger financial position and is now being recognized as a leader among other states for improving our financial condition,” Abercrombie said.

In completing the bond transaction, the Abercrombie Administration also sought to improve the State’s credit rating.

“To achieve this objective the State’s financial goal in the near term is to show positive results in rebuilding reserves, reducing unfunded liabilities ratios, and balancing future revenue drivers such as military contributions and federal program spending,” Young said. “Credit agency reports evaluating the State’s financial management positively highlighted the State’s planned efforts.”

This transaction achieved the following:

* Reduced debt service by saving $59 million on refunded outstanding debt
* Keeps debt service for fiscal year 2012 – 2013 at legislatively-appropriated level
* Restructured current outstanding debt
* Normalizes the State’s debt service profile
* Builds debt capacity from 2014 to 2019
* Improves the state’s financial position
* Garnered positive credit rating review
* Enables recapitalization of the Hurricane Relief and Rainy Day Funds

“This is the largest bond issue in the history of the State of Hawaii to date,” Young said. “The merits and components of this transaction execute on our objective to get our financial house in order and at the same time we are rebuilding investor confidence.”

Young led a finance team from the State of Hawaii to complete this transaction during a recent trip to New York City. The team included Department of Business, Economic Development and Tourism Director Richard Lim, B&F Financial Administrator Scott Kami, State Economist Eugene Tian, Ph.D., and Representative Kyle Yamashita.

“I commend our team who sought a very attractive interest rate in selling this amount of bonds and ensuring that our taxpayer dollars are being invested for the benefit of our fiscal future,” Abercrombie said. “We are beginning to reshape the way Government does business in Hawai’i and building a more financially stable government. Future generations will benefit greatly as we continue to work on minimizing future debt.”

The $1.28 billion in bonds included $800 million in new debt, but was complimented with $488 million in refunding currently existing bonds at a lower interest rate.

Bond buyers benefit from purchasing Hawaii bonds because interest on the bonds is excluded from gross income for Federal income tax purposes and exempt from all taxation by the State of Hawaii.

The $800 million of new money proceeds from the bond sale will be used for various public improvement projects, including public buildings and facilities, elementary and secondary schools, community college and university facilities, libraries and parks.

Chamber of Commerce of Hawaii Board of Directors’ Chair Dr. Ginny Pressler said, “It is clear that the Abercrombie Administration is taking a business approach in dealing with its finances. Investors have given their approval, which is great for the overall business of Hawaii.”

“The response by these investors is welcomed news to Hawaii,” said Sherry Menor-McNamara Chief Operating Officer of the Chamber of Commerce of Hawaii. “This transaction proves that our State government is doing business to stabilize its finances.”

Bank of America Merrill Lynch and Goldman Sachs and Co. served as the joint bookrunner managers for the bond sale, with Barclays Capital, Morgan Stanley, JP Morgan and Citi serving as co-managers. Firms with offices in Hawaii also participated in a retail selling group for the Bonds.

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Statement from Gov. Neil Abercrombie:

Aloha friends,

In a few days, we will be marking one-year in office.

Today, I was pleased to announce that the work we’ve done to rebuild our economy is paying off. A few days ago, the State of Hawaii successfully sold $1.28 billion of General Obligation Bonds. This latest financial action is the result of the culmination of work by the Abercrombie Administration to restructure its debt and create a solid financial foundation.

What this means to you, the taxpayer, is that we are lowering the amount of debt that the State has in the future. Gone are the days where we kick the fiscal can down the road. We are picking it up and facing our financial obligations to make our economy better and ensure economic stability and growth. We are lowering the State’s deficit.

This means businesses in Hawaii can be confident in moving forward on projects that were on hold because the State’s economy was not looked upon as a favorable place to invest.

The tough decisions, many of which were considered unpopular, have attracted major investors, and the resounding success of our recent historic bond sale is the result.

Following the transaction, Moody’s Investors Service, Standard & Poor’s Ratings Service and Fitch Ratings affirmed the State’s credit ratings of Aa2/AA/AA. Standard & Poor’s commented, “Gov. Neil Abercrombie’s willingness to implement aggressive solutions, totaling $1.32 billion, to balance the fiscal 2011-2013 biennial budget in light of a projected budget shortfall that had reached $1.25 billion for the biennium.”

Moody’s further cited the State’s “historical fiscal conservatism” because all of Hawaii’s General Obligation debt is issued at a fixed rate, and repayment is relatively rapid with 95% of principal repaid in 15 years. In addition, Fitch affirmed that the State’s “financial management is sound.”

My administration used our reserves to help pull us through the last fiscal year. I am happy to report that we will be paying back those monies to the Hurricane Relief and the Rainy Day Funds.

I made the commitment to invest in education and rebuild our economy, sustain our Hawaii for future generations and restore public confidence. We are sticking to our game plan and it is working.

Imua.