GO Refunding Coming

North Carolina on Tuesday expects to issue its first general obligation bonds in two years with a $383 million refunding deal that will price competitively.

The Series 2009A bonds have triple-A ratings from Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings.

The bonds mature between one and 21 years. Bond proceeds will refund Series 1999 public school building bonds, Series 2001A and 2003 highway bonds, Series 2004 higher education bonds, and Series 2006A and 2007A public improvement bonds.

The rating agencies said the state’s debt management should protect its credit from the effects of the economic recession.

“Faced with deteriorating revenues and an economy that will slowly grow out of the recession, we believe the state has reacted prudently in resolving the fiscal 2009 revenue shortfall and formulating a biennium budget that is sustainable,” said Standard & Poor’s analyst Richard Marino. He added that the state has historically strong debt oversight that remained disciplined amid the revenue shortfall.

The state’s net tax-supported debt has increased significantly in recent years, rising to $7.4 billion at the end of August from $1.6 billion in 1996, Moody’s said in a report. Additionally, 11% of the state’s outstanding debt is variable rate. Interest rate swaps had a negative $76.2 million mark-to-market value as of June 30, Moody’s said.

North Carolina balanced its fiscal 2010 budget by overcoming a $4.6 billion revenue shortfall with cost cutting and tax hikes. A 1% sales tax increase went into effect Sept. 1. The federal stimulus will provide $2.4 billion through 2010.

Parker Poe Adams & Bernstein LLP and the Banks Law Firm PA will be co-bond counsel. Davenport & Co. will be financial adviser.

North Carolina’s last GO deal was in April 2007, when it sold $84.4 million to Citi at a true interest cost of 4.35%.

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