BRADENTON, Fla. - Alabama expects to price $508.5 million in state highway bonds in mid-January.
The deal won an AAA rating from Standard & Poor's on Dec. 8, and is expected to save the state about $35 million to $40 million in future interest payments, according to Gov. Robert Bentley.
The bonds are part of the $1 billion Alabama Transportation Rehabilitation Improvement Program, or ATRIP, the road and bridge improvement program spearheaded by Bentley in 2012.
"This S&P rating is a testament to the strong financial stability our transportation program" Bentley said in a statement. "Because of the good credit rating, we will be able to finance the remaining amount of the ATRIP bonds at a very low interest rate and continue to make important upgrades to Alabama roads and bridges."
The grant anticipation revenue vehicle bonds will also be secured by an additional pledge of the state's share of net gasoline tax proceeds, and will be sold by the Alabama Federal Aid Highway Finance Authority.
"The AAA rating reflects our opinion of the creditworthiness of the 2014 special obligation revenue bonds' program structure, which has strong debt service coverage, a pledge of Alabama's share of Title 23 federal aid transportation grants, and an additional pledge of the state's share of net gasoline tax proceeds," said S&P analyst Georgina Rovirosa.
"The AA rating on the state's Garvee bonds reflects our view of view of the authority's strong pro forma debt service coverage, as well as Alabama's history of maximizing its share of Title 23 funds," she added.
The bonds have strong historical pro forma maximum annual debt service coverage of 10.1 times for the entire Garvee program, based on 2014 obligation authority, S&P said.
Bond provisions include an additional bonds test requiring historical federal reimbursement revenue to provide at least three times maximum annual debt service coverage on existing and proposed bonds.
S&P also affirmed its AA rating on the authority's outstanding $368 million of Garvees sold in 2011 and 2012, which are secured solely by federal aid transportation grants. The outlook is stable.
Moody's Investors Service assigned its Aa1 rating and stable outlook to the upcoming sale. The outlook is stable. Moody's assigns A1 ratings to the 2011 and 2012 bonds.
The Alabama Public Road and Bridge Fund, which serves as the general operating fund of the state Department of Transportation, maintains high levels of liquidity amounting to $272.4 million as of Sept. 30, 2013, Moody's noted.
Rice Advisory LLC is Alabama's financial advisor.
