DALLAS - Arkansas' true interest cost on $206.5 million of federal highway grant anticipation and tax revenue bonds landed at 2.0858% under a winning bid from Citi on Nov. 5.
The rate on double-A-rated, 5% coupon Garvees reaching final maturity in 2027 is nearly 12 basis points lower than the winning bid on $171.5 million sold in 2013 to JPMorgan.
The 2013 bonds had an average maturity of 7.2 years, while the 2014 bonds average maturity is 6.6 years.
Seven major underwriters bid on this year's deal with a spread of 6 basis points between them.
"The bids were very competitive and slightly better that we expected," said Dennis Hunt, senior vice president for financial advisor Stephens Inc.
The lowest rate in the past five years on comparable maturities was 1.6204% on $225 million sold in 2012.
Arkansas has held a competitive sale of Garvees every year since 2010, with the exception of 2011.
This issue is the third of three series from a $575 million authorization approved by voters in 2011.
The Garvees are supported by federal highway grants as well as a four-cent portion of the state's 28.4 cents per gallon diesel fuel tax and other fees. Arkansas also pledges its full faith and credit, which brings the credit rating up to state's general obligation bond rating.
Gov. Mike Beebe called a special election on the Garvee proposal in November 2011, winning voter approval by a 4-to-1 margin.
The bonds carry Arkansas' general obligation bond ratings of AA from Standard & Poor's and Aa1 from Moody's Investors Service, with stable outlooks. Fitch Ratings does not rate the debt.
Beebe, a Democrat, leaves office this year and will be replaced by newly elected governor Asa Hutchinson, a Republican.
"The stable outlook reflects our view that Arkansas' good financial management practices and strong financial position will likely result in timely corrective budget measures in response to revenue declines," S&P analyst Henry Henderson noted in affirming the state's AA rating. "We do not expect to change the rating within our outlook's two-year horizon, given our expectation that officials will continue to make corrective adjustments."
