WASHINGTON - The Virginia Resources Authority plans to issue $219 million of infrastructure revenue bonds under its pooled financing program next week in a negotiated deal to finance water, transportation, and other projects for eight new localities in their program.
"This is the largest [deal] in our pooled financing program, by double," said Sheryl D. Bailey, executive director of the VRA. "What we have found is that the request from localities for assistance, in terms of access to the capital markets, has more than tripled from previous levels."
The authority will have a retail-order period on Nov. 19 and institutional pricing on Nov. 20, and given high retail demand, Bailey said she expects the deal to do well with those investors.
"We believe our method of sale is appropriate for this market," she said. "This is a method of sale we've been using since April of '06. We've always built on the foundation of retail investors, with a one-day order period, selling to Virginia citizens first."
Bailey said she has been monitoring the market since financial turmoil escalated this fall, but that she thinks the foundation the VRA has built with retail investors will be beneficial.
"We will have extensive outreach to that market - I'm going to be doing a newspaper and radio advertising campaign beginning Sunday," Bailey said. "We are going to do significant marketing to the retail investors. This is not anything new, but something we've been doing quite a bit and we are going to extend it and expand it."
Citi is senior manager on the deal. Morgan Keegan & Co. is co-senior manager. Banc of America Securities, BB&T Capital Markets, Goldman, Sachs & Co., Loop Capital Markets, M.R. Beal & Co., Morgan Stanley, and Wachovia Securities round out the underwriting team.
"We think we have the right mix; we think we have assembled a group of underwriters to effectively sell our bonds at the lowest interest cost to our borrowers," Bailey said. "Citi is our senior manager and they have been very successful in bringing large transactions to market since we've had this period of dislocation. These relationships have only been strengthened during these turbulent times."
Davenport & Co. and Strategic Solutions Center are co-financial advisers. Bond counsel is McGuireWoods LLP. Underwriters counsel is Troutman Sanders LLP.
High ratings should also help move the deal, according to Bailey.
The bonds, $150.4 million of senior Series 2008B and $68.6 million of subordinate Series 2008B, both grabbed high ratings. Moody’s Investors Service rates the senior bonds AAA and the subordinate Series Aa2. Standard & Poor’s rates the senior bonds AAA and rates the subordinate bonds AA.
Triple-A rated Virginia is in the market this week with $265 million of general obligation bonds. The state traditionally offers its GOs competitively but unsettled market conditions prompted it to sell through negotiation. A retail order period was set for yesterday with institutional pricing today.
The VRA was established in 1984 and can finance infrastructure related to roads and federal facilities, drinking water, wastewater, solid-waste management and recycling, airport facilities, law enforcement and emergency preparedness projects, brownfield remediation, and petroleum storage-tank cleanups. The authority created the pooled financing program in 2003 and issues debt twice a year for it, in the spring and fall, and is lending to eight new borrowers and one repeat borrower, Bailey said.
The new borrowers are: the Alexandria Sanitation Authority, King George County, Loudoun County, Southampton County, York County, and the cities of Roanoke, Waynesboro, and Winchester. The city of Suffolk is a repeat borrower in next week's offering.
"We're helping in their key infrastructure investments that are essential to economic vitality and also to the quality of life," Bailey said. "We are assisting in a great deal of public safety projects - EMS facilities, a lot of fire facilities, police academy training - and we are assisting with transportation - bridge renovations across the commonwealth, parking garages - and, of course, water and wastewater facilities."
The localities taking out loans from the VRA are also financing new areas of infrastructure, including government buildings, libraries, parks, and recreation facilities.
The bonds are secured by revenue pledges, general obligation pledges from the state, lease revenues, and revenues with moral obligation.
This latest issuance will bring total borrowing under the authority's pooled financing program to $865.7 million. The agency now has 64 borrowers in its pool program. Bailey said the VRA's goal is to provide the lowest-cost interest rates and the program does just that.
"Because bond insurance is no longer a viable option for them, what we offer to them is access to capital markets in the most cost-effective way," she said, adding that because of the tumult in the muni market, "we are becoming more useful to them - we are assisting localities in many ways."
