BRADENTON, Fla. — The Kentucky Turnpike Authority Wednesday expects to conclude a two-day pricing of $112.6 million of new and refunding revenue bonds.
Some $56 million of bond proceeds will be used for highway projects associated with the Base Realignment and Closure changes at Fort Knox. The balance of the proceeds will be used to refund debt sold in 2001.
The new-money amortization begins in 2016 and goes through 2031, with one year of capitalized interest through fiscal 2012.
The refunding of Series 2001B bonds is being done within existing maturities between 2016 to 2019.
The refunding is expected to bring an estimated present-value savings of $6.3 million, or nearly 11% of refunded par, according to Tom Howard, executive director of Kentucky’s Office of Financial Management.
At midday Tuesday, Howard said pricing of the deal was going well.
“I can say that retail interest is consistent with expectations from prior deals,” he added.
The turnpike bonds are rated AA-minus with a negative outlook by Fitch Ratings, Aa2 with a negative outlook by Moody’s Investors Service, and AA-plus with a stable outlook by Standard & Poor’s.
All three agencies affirmed the same ratings on the authority’s $1.24 billion of outstanding debt.
Moody’s said its negative outlook reflected road fund revenue that declined in the economic downturn, but analysts noted that revenues are up this fiscal year. Fitch said its negative outlook concerned the state’s reduced operating flexibility and low pension funding.
Howard did not expect last week’s downgrade of the state’s general obligation issuer rating by Moody’s to affect pricing of the turnpike bonds.
Moody’s dropped the GO rating to Aa2 from Aa1 and maintained a negative outlook.
The downgrade reflected “significant fiscal stress related to the economic downturn” as well as a large unfunded pension liability, and a trend of reliance on non-recurring budget balancing measures, the agency said.
“The turnpike has always been a special credit in the commonwealth and I do not expect any confusion from last week’s rating action by Moody’s, especially since the turnpike carries a AA-plus rating and stable outlook from Standard & Poor’s,” Howard said.
The turnpike bonds are secured by lease appropriations from a constitutionally dedicated road fund and subject to an additional bond test of two times.
Following this week’s sale, Howard said the Turnpike Authority may sell another $56 million this fall for the Base Realignment and Closure road projects.
Goldman, Sachs & Co. is the book-runner. Others in the syndicate are Bank of America Merrill Lynch, Citi, Edward D. Jones & Co., First Kentucky Securities Corp., J.J.B. Hilliard, W.L. Lyons LLC, Morgan Keegan & Co., Morgan Stanley, PNC Capital Markets LLC, Ross, Sinclaire & Associates, and Stifel, Nicolaus & Co.
Peck, Shaffer & Williams LLP is bond counsel. Stites & Harbison PLLC is underwriters’ counsel.
