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Georgia Has a Very Big Day

BRADENTON, Fla. — Triple-A rated Georgia on Tuesday is set to competitively price nearly $1 billion of new-money and refunding bonds in its largest single-day sale ever.

Just under half of the proceeds raised, $440.5 million of tax-exempt general obligation bonds, will fund a variety of state programs, including education, transportation and public safety initiatives.

Another $77 million of taxable qualified school construction bonds will finance projects for county and independent school systems and state schools.

The deal will remain Georgia’s largest if a $441.1 million tax-exempt refunding component stays in the money. The state targets a present-value savings of 5% and a minimum of 4%.

The offering is structured in seven pieces: $39.1 million in GO Series A, $28 million in GO Series B, $412.5 million in GO Series C, $77 million in QSCB Series D, $69.7 million in GO refunding Series E-1, $245.7 million in GO refunding Series E-2, and $125.75 million in GO refunding Series F.

The deal is expected to attract good interest rates for Georgia due to the low interest-rate environment coupled with investors’ appetite for high-grade paper.

Public Resources Advisory Group is the state’s financial adviser. King & Spalding LLP is bond counsel. Kutak Rock LLP is disclosure counsel.

Fitch Ratings, Moody’s Investors Service and Standard & Poor’s all assign triple-A ratings to the issue.

All three agencies also assigned a stable outlook to the state’s credit and affirmed their highest ratings on $8.5 billion of outstanding GO bonds and guaranteed revenue debt.

Rating agencies cited the state’s conservative debt management, moderate debt burden, and well-funded pensions, while noting that Georgia, like other states, is just beginning to emerge from the recession after using one-time sources of revenue for the budget and drawing down reserves.

“The state has a long history of timely action to address fiscal imbalance,” said Fitch analyst Douglas Offerman. “The recession affected revenues well beyond forecast estimates, forcing deep cuts and reliance on one-time resources, including reserve draws and federal stimulus.”

Longer-term challenges include managing growth and the demand for services, he said.

The state’s budget reserves were largely used up by the end of fiscal 2010, after rising to $1.5 billion, or about 8% of revenues, according to Moody’s analyst Kimberly Lyons. “The outlook for the state’s debt, including the current issues and $8.5 billion of previously issued bonds, remains stable based on our expectation Georgia will take appropriate steps to restore balanced financial operations and replenish reserves as the economy recovers,” she said.

This week’s sale could be the state’s last new-money issuance until the fall if agencies need funds by then. Georgia only issues debt when agencies are ready to use the funds.

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