The North Carolina Department of Transportation expects to issue $250 million of grant anticipation revenue vehicle bonds on Monday after receiving a rating upgrade earlier this month.
Standard & Poor’s raised its rating to AA from AA-minus on North Carolina’s Series 2007 Garvee bonds while applying a AA rating with a stable outlook to the upcoming sale of Series 2009 bonds. The bonds are rated Aa3 by Moody’s Investors Service and AA-minus by Fitch Ratings.
The state expects to finance 20 projects plus various road resurfacing needs with the proceeds. The DOT is also applying for federal funds allocated in the federal stimulus law that, if granted, would be combined with Garvee funding to finance additional projects.
North Carolina has $498 million of Garvees outstanding. The state expects to issue $335 million of Garvees in 2011 and $104 million in 2013, according to Standard & Poor’s.
Garvees are backed by appropriations of federal transportation funds. In its rating report, Fitch noted historically strong federal support for transportation funding. However, it added that with growing budget deficits, “there is no guarantee that such federal transportation funding growth will continue during subsequent reauthorization periods.”
North Carolina is a donor state, receiving only 92 cents for every dollar it contributes in fuel taxes and this status “may result in the state being less susceptible to changes” in funding policy, Fitch said.
McGuireWoods LLP will serve as bond counsel. Merrill Lynch & Co. will be lead underwriter with Barclays Capital, Citi, JPMorgan, Loop Capital Markets LLC and Wells Fargo Securities serving as co-managers. First Southwest Co. will serve as financial adviser.
