DALLAS – Louisiana intends to take $84 million of highway revenue bonds to market Wednesday in a negotiated sale, two months after canceling a larger issue.
The state had scheduled a $249.2 million issue in mid-January, but deferred it in favor of three smaller, consecutive annual tranches as had been the original proposal. The State Bond Commission approved this week’s revised sale at its February session.
The bonds are rated AA-minus by Fitch and Aa3 by Moody’s Investors Service.
Citi is senior manager. Underwriters include Loop Capital Markets, Raymond James, Morgan Stanley, and Stephens Inc. Lamont Financial Services Inc. is financial advisor. Foley & Judell LLP is bond counsel.
The 2012 Legislature authorized the bonds with Act 135, which was sponsored by Rep. James Fannin, D-Jonesboro, chairman of the House Appropriations Committee and a member of the State Bond Commission.
The road bond plan was endorsed by Gov. Bobby Jindal and included in his 2012 legislative package. The enabling bill sailed through the Legislature without a single negative vote.
Transportation Secretary Sherri LeBas said in May 2012 that the state would issue $100 million of the 20-year bonds in fiscal 2013, $100 million in 2014, and $125 million in 2015.
Treasurer John N. Kennedy suggested a more rapid approach.
The bonds should be issued no later than the end of 2012 and as early as possible to avoid increased interest rates over the proposed three-year sales schedule, Kennedy said at the June 20 State Bond Commission meeting.
In October, LeBas said the administration agreed with the single-sale plan on advice of legal and financial counsel that it would be a financial advantage to get all the proceeds up front. The Bond Commission approved a single-sale structure Oct. 18 for up to $350 million of the rural road bonds.
However, on Jan. 18 LeBas said the state would restructure the bond issue and revert to the original three-year sales schedule.
“Because borrowing costs are higher than expected and interest rates are predicted to stay low, it does not make good fiscal sense for the state to borrow more money than is needed,” she said.
The bonds are supported by 50% of the annual collections in the State Highway Improvement Fund, a dedicated fund that receives the revenues from fees and licenses on commercial trucks and trailers. Collections are estimated at $51 million in fiscal 2013.
Commissioner of Administration Kristy Nichols said the phased sales avoid debt service now for projects not slated until the third year of the program.
“It comes down to this -- it costs money to borrow money,” she said in January. “We’re now looking to reduce the amount of borrowing to the first year projects and restructure the sale to save the state money.”
Proceeds from the bonds are earmarked in Act 135 for a three-year program by the Department of Transportation and Development to upgrade more than 1,000 miles of rural roads that are not eligible for federal funds.
