New Hampshire Plans $75M, With $150M Waiting in the Wings

As New Hampshire gears up for a $75 million general obligation sale scheduled for tomorrow, it is also looking ahead to two additional debt issues this year totaling $150 million for road infrastructure improvements.

The proceeds of the state’s $75 million competitive GO sale will go towards various capital projects around the state, according to Treasurer Catherine A. Provencher. The bonds are fixed-rate 20-year bonds.

Public Resources Advisory Group is the state’s financial adviser, and Edwards Angell Palmer & Dodge LLP is the bond counsel for the sale.

Insurance will be at the option of the bidders.

PRAG senior managing director Monika Conley said of the deal, “It will be interesting to know whether there will be insurance or not, especially in light of what is happening with insurance these days.”

In December 2006, the state did insure its $121.9 million negotiated GO refunding issue with MBIA Insurance Corp. Additionally, a portion of the state’s $75 million new-money December 2006 issuance was insured by MBIA at the option of the bidder.

Conley said that so far, there has been a great deal of interest in New Hampshire’s upcoming sale.

“Many companies are calling and inquiring about the bond issue,” Conley said. “There is a strong indication right now that least six bids will come for the bonds.”

PRAG has also begun working on the two additional upcoming bond sales that New Hampshire is planning, Conley said. Provencher said that the state anticipates selling about $50 million of GO variable-rate debt possibly in March for highway and bridge projects. Additionally, in late spring, the state is looking to sell about $100 million of revenue bonds for the New Hampshire Turnpike System.

The state has not issued new money for the turnpike system since 1999, according to Provencher. Additionally, New Hampshire historically has not issued bonds for highway projects, but rather funded projects on a pay-as-you-go basis. But with the double digit increases on highway construction costs in recent years, the state decided it was better off issuing debt and get going on the projects rather than waiting, Provencher said.

“We recently had a toll increase, so there’s adequate revenue to support additional debt service so we can get moving on some improvements to the turnpike infrastructure,” Provencher said.The toll increase, implemented in October last year, will bring $24 million of expected additional revenues each year.

“We have additional cash which we can use to borrow money with and do a bunch of projects that are a long-time coming and waiting in the wings,” said the state’s Department of Transportation assistant commissioner Jeff Brillhart.

Brillhart said that while the state had been maintaining its roads with the pay-go system, it hadn’t been able to tackle improvements until the toll increase provided additional money for bonding.

“This is the sign of the times,” Brillhart said. “The whole country is talking about doing things differently, so we’re doing it too. We’re borrowing money to try and make ends meet.”

Moody’s Investors Service assigns New Hampshire’s GOs a Aa2 rating, while Fitch Ratings and Standard & Poor’s give a AA rating.

Fitch director Kyle R. Gephart said that one of the hallmarks of New Hampshire’s GO credit is its excellent debt position, with debt amortizing quickly. This affords the state some flexibility in issuing more debt, Gephart said. Provencher said the state generally pays down 60% of its principal debt in the first 10 years.

Additionally, New Hampshire has “demonstrated a track record of economic strength — they continue to outpace the national rate of growth,” Gephart said.

The state’s reserve levels have continuously grown over the last couple of years, to $151 million in 2007 from $17 million in 2003, said Standard & Poor’s Karl Jacob.

Additionally, New Hampshire has low and “very manageable” debt levels, ranking 42 out of 50 states, said Moody’s Nicole Johnson. The state’s debt as a percentage of personal income is 1.3% compared to the U.S. state median of 2.4%, according to Johnson.

As of June 30, 2007, New Hampshire has $654 million of outstanding GO debt, according to Provencher.

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