State Sees Big BAB Savings

Florida officials yesterday said the state’s first Build America Bond sale — a $255 million taxable deal — would save $56.1 million for the state’s turnpike enterprise system.

The Florida Department of Transportation turnpike revenue bonds were priced June 26 by a 10-member syndicate selling $68.5 million of Series 2009A tax-exempt bonds and $255 million of Series 2009B taxable BABs.

Because the interest rate on the BABs with the $131.3 million federal rebate is less than traditional tax-exempt financing, total interest cost savings over the 30-year term of the issue will be $56.1 million, Florida’s chief financial officer, Alex Sink, said in a release.

“Making sure that Florida was taking advantage of these Build America Bonds was a great way to see millions in cost savings,” Sink said, while also crediting the state Division of Bond Finance, which oversaw the deal.

The projected savings are a rare bit of good news as Florida continues to suffer the effects of the recession and declining revenue.

The bonds were rated AA-minus by Fitch Ratings and Standard & Poor’s, and Aa2 by Moody’s Investors Service.

However, Fitch and Standard & Poor’s revised their outlook on the turnpike’s debt to negative from stable, and Moody’s placed its rating on watch for possible downgrade.

Analysts cited recent declines in transactions and revenue that puts pressure on the turnpike system’s high debt levels. The system has approximately $2.5 billion of outstanding debt.

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Transportation industry
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