GRDA Gets Berkshire Backing

The $568 million of revenue bonds sold last week by the Grand River Dam Authority were the first Oklahoma state agency bonds to be enhanced with triple-A rated insurance from Berkshire Hathaway Inc., the Omaha-based firm headed up by billionaire investor Warren Buffett.

GRDA chief executive officer Kevin Easley said the coverage highlights the agency’s improved financial and operational situation. The bonds were over-subscribed by almost $170 million at the sale last week.

“It reinforces for us how well this issue has been received, and the recent, positive financial strides GRDA has made,” Easley said.

Chris Cochran, executive vice president and director of public finance with Capital West Securities Inc., said the coverage would not have been available before the authority began raising its rates in 2004 to meet debt service coverage requirements.

“Berkshire Hathaway is an extremely selective firm,” he said. “Without the recent improvements in GRDA’s financial condition and credit rating upgrades, there is no way that Berkshire would have agreed to insure this issue. The fact that the firm is willing to stand behind GRDA on this bond issue is a very big deal.”

Senior managers on the underwriting team included Citi as well as Capital West Securities Inc. Underwriters also include BOSC Inc. and Wells Nelson & Associates Inc.

Cochran said the GRDA sale was the largest issue for which Capital West Securities has served as a senior manager.

The $549.2 million of 20-year tax-exempt bonds were given underlying ratings of A2 by Moody’s Investors Service, A by Standard & Poor’s, and A by Fitch Ratings. The $19.1 million of two-year taxable bonds carry short-term ratings of F1 from Fitch and MIG-1 from Moody’s. Standard & Poor’s assigned an A rating to the short-term taxable bonds.

Standard & Poor’s increased its rating on the authority’s debt to A from A-minus on Aug. 14, with Fitch upgrading the debt to A from A-minus two weeks later.

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