BRADENTON, Fla. — The Alabama Public School and College Authority is back in the market tomorrow with the competitive sale of approximately $50 million of capital improvement bonds just two months after selling $1.07 billion of debt in the state’s largest-single bond issue.
The proceeds of tomorrow’s sale will be loaned to 18 boards of education to finance capital improvements approved by the APSCA. The issuance comes under a loan program that allows schools to borrow against a statewide 3-mill property tax, but the bonds are secured by utility, sales, and use taxes.
The bonds are expected to be structured serially with maturities from 2009 to 2028. Insurance is at bidders’ option, according to Phil Dotts of Public FA Inc., the APSCA’s financial adviser.. Bids will be taken through Ipreo’s Parity system.
Moody’s Investors Service has assigned a rating of Aa2 and a stable outlook to the authority’s Series 2008 bonds. Standard & Poor’s assigned a AA rating and stable outlook.
Each bond sale by the APSCA is given a lien position subordinate to prior issuances. Tomorrow’s sale represents the 13th-lien pledge of revenues.
“Moody’s views the coverage provided by the pledged revenues, 9.6 times maximum annual debt service, as sufficient to offset risks that this sequential-lien structure might pose to holders of junior bonds,” said a report by Moody’s analyst Ted Hampton.
In the past decade, Hampton said coverage has fallen sharply from 20 times maximum annual debt service. The largest single contributor to the decline was the authority’s issuance of $1.07 billion of bonds in December, which were sold largely to finance a backlog of capital projects.
“While no issue of comparable size is now anticipated, substantial increases in program leverage at some point might indicate weaker credit positions for future subordinate-lien debt,” Hampton said.
Standard & Poor’s said its rating reflected strong debt service coverage and good historic growth of pledged revenues, mitigated by the lack of a debt service reserve fund.
Alabama’s economic trends have continued to improve since the 2001 recession due partly to the growing statewide automotive industry and professional and business service sectors, said a report by Standard & Poor’s analyst Sussan Corson, who noted that the growth rate appears to be slowing particularly in the housing market.
Maynard, Cooper & Gale PC is bond counsel. Balch & Bingham LLP is disclosure counsel.
On Dec. 5, the authority competitively sold $1.07 billion of capital improvement bonds with Lehman Brothers the winning bidder at a true interest cost of 4.181%, according to Thomson Financial data. The deal yielded 3.03% in 2009, 3.77% in 2018, and 4.54% in 2026. Only the final maturity in 2027 was insured, by Financial Security Assurance, and it yielded 4.64%.
The APSCA, a public corporation created by the Legislature to fund capital improvements of public schools and institutions of higher education, is overseen by Gov. Bob Riley, Superintendent of Education Joseph Morton, and state finance director Jim Main. The authority had $2.4 billion in principal amount of bonds outstanding as of Jan. 1.
