The Massachusetts Port Authority is evaluating $106 million of auction-rate securities and anticipates refunding the debt or converting the bonds into variable-rate mode.
Officials will present the board with their recommendations at the next board meeting on May 15.
Citi is underwriter on the upcoming sale and Government Finance Associates is the authority’s financial adviser.
“The question that we’re wrestling with is whether we should sell a fixed-rate issue or a variable rate,” said Betsy Taylor, the authority’s finance director.
If MassPort does plan to convert the bonds into variable-rate mode, it has offers from a selection of letter of credit providers to choose from and at rates officials are comfortable with.
“We believe we have opportunities and we are very pleased with the opportunities,” Taylor said regarding LOC options in relation to the auction-rate securities.
The ARS are a portion of MassPort’s $1.42 billion of total outstanding long-term debt. The floating-rate bonds include Series 2003B for $78 million that resets every 35 days and a weekly rate Series 2005B for $28 million. There are no swap agreements attached to the auction-rate securities, Taylor said.
Series 2003B has a current interest rate of 4.083%, and priced as high as 6% on Dec. 26. The auction for the bonds failed last week and in early March and the securities have a default rate of 1.5 times the London Interbank Offered Rate. The next sale is on
May 15.
Citi is the broker-dealer and MBIA Insurance Corp. backs the debt.
Series 2005B has a current interest rate of 4.25% and priced as high as 7.95% on Feb. 20. The bonds have not failed at auction and carry an interest rate ceiling of 14% and will reset again on Wednesday.
Goldman, Sachs & Co is the broker-dealer and Ambac Assurance Corp. insures the debt.
In a separate issue, Edwards, Angell, Palmer & Dodge LLP will continue to serve as MassPort’s disclosure counsel for a three-year term. The authority chose to bid out for disclosure services in late January in a routine request for proposals.
The authority has $1.23 billion of outstanding general airport revenue bonds, which Fitch Ratings and Standard & Poor’s rate AA and AA-minus, respectively. Moody’s Investors Service assigns the GARBs its Aa3 rating. Standard & Poor’s and Fitch rate MassPort’s $190 million of outstanding passenger facility charge debt A and A-plus, respectively. Moody’s rates the PFC bonds A2.
MassPort oversees Logan and Worcester Regional Airport, the Tobin Memorial Bridge, and the Port of Boston.
