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Massachusetts Set To Bond For Bridges

Massachusetts on Tuesday is scheduled to sell $419.3 million of commonwealth transportation fund revenue bonds by competitive bid under its accelerated bridge program.

According to Colin MacNaught, assistant treasurer for debt management, this is the first time the state is selling these bonds as tax-exempt. Massachusetts only issued such bonds once before, late in 2010, and it sold those on a taxable basis via the Build America Bond and Recovery Zone programs.

The Series 2012A bonds will mature from 2013 to 2041.

Most of the proceeds will enable the state’s Department of Transportation to begin five major projects. “These projects are very essential to the state,” MacNaught said.

They include the fixing the Longfellow Bridge, which links Cambridge and Boston and serves vehicular and pedestrian traffic, as well as the Massachusetts Bay Transportation Authority’s Red Line trains. The cost is about $270 million.

Replacement projects include the Fore River Bridge, which carries state Route 3A between Quincy and Weymouth and serves considerable commercial shipping traffic; the Kenneth F. Burns Memorial Bridge along Route 9 between Shrewsbury and Worcester; and the John Greenleaf Whittier Memorial Bridge over the Merrimack River and the widening of 4.25 miles of Interstate 95 between Newburyport and Salisbury.

In addition, the state plans to reconstruct interchange of I-195 and state Route 79 in Fall River, replacing bridges and roadways and improving pedestrian and bicycle connections.

The state legislature authorized the accelerated bridge program in 2008 and created the facility one year later. Under a five-year plan, Massachusetts will repair or replace 550 structurally deficient bridges.

Moody’s Investors Service and Standard & Poor’s each assigned triple-A ratings to the bonds. Moody’s affirmed the Aaa rating assigned to $576 million of outstanding parity debt. Standard & Poor’s also affirmed a AAA on the commonwealth’s outstanding gas tax bonds, senior lien and subordinated lien.

Both agencies assigned stable outlooks.

“The strong credit structure supporting the bonds insulates bondholders from future volatility or deterioration of pledged revenues, and we expect coverage levels to remain strong despite additional planned debt issuance,” said S&P credit analyst Robin Prunty.

Moody’s praised Massachusetts for imposing an additional bonds test that requires four-times coverage of maximum annual debt service and the commonwealth’s covenant not to alter the pledged revenues should they result in maximum annual debt-service coverage of less than four times.

The rating agency also cited debt service coverage provided by the pledged gas taxes and Registry of Motor Vehicles fees and a special fuels tax, even during economic downturns.

“With projected coverage of more than nine-times debt service through the life of the program, we think coverage is outstanding,” MacNaught said. “For the state, this is the pristine credit with ratings of AAA. The pledge of $1.1 billion is incredibly strong and diverse by the different sources.”

Public Resources Advisory Group is the financial advisor. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC is bond counsel.

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