Georgia Prices $1.4B in Top-Rated GOs Tuesday

Georgia Gov. Nathan Deal

BRADENTON, Fla. - Triple-A rated Georgia plans to price $1.4 billion of general obligation bonds Tuesday in the largest competitive offering of the week.

The deal will be split up into five different auctions.

There will be $717.3 million of new money 10- and 20-year tax exempt GOs, split into two tranches, and $199.9 million of 10-year new money taxable GOs sold in a separate auction.

Proceeds are earmarked for a wide range of state and local capital needs.

About $450.2 million of taxable and tax-exempt refunding GO bonds are scheduled, in a $382.2 million tax-exempt auction for Series 2016C-1 and Series 2016C-2, and a $68 million pricing for the taxable refunding debt..

Georgia's GO debt is backed by the full, faith and credit of the state's taxing power, as well as payments from the state general revenue fund where collections have grown over the past six years.

The bonds are rated triple-A by Fitch Ratings, Moody's Investors Service, and S&P Global Ratings.

"Georgia's revenue performance in fiscal year 2016 has been strong and ahead of the enacted budget forecast reflecting both overall economic growth as well as structural and procedural changes," said Fitch analyst Eric Kim. "After a sharp recessionary downturn, the state's diverse economy has accelerated with employment growth outpacing national trends."

Personal income tax, and sales and use taxes, account for about three-fourths of the state's general fund receipts, according to Fitch.

On the eve of Tuesday's deal pricing, Gov. Nathan Deal announced that Georgia's net tax collections for May totaled $1.56 billion, an increase of $58.6 million or 4.1% compared to May 2015.

Deal also said the state has seen revenues increase year-over-year in the 11 months of the 2016 fiscal year with total collections increasing by $1.7 billion or 9.9% over the same period in 2015.

"If current trends hold, fiscal 2016 will be the sixth consecutive year of positive revenue performance and seventh consecutive year in which the state will add to its revenue shortfall reserve," said Moody's analyst Anne Cosgrove.

Analysts said factors supporting the ratings include Georgia's growing economy, as well as the state's conservative fiscal management, rapid replenishment of reserves since the end of the recession, moderate debt burden, and rapid amortization of general obligation securities.

The state's "proactive management" of long-term liabilities through full funding of the state's portion of pension contributions and the creation of other post-employment benefit fund reserves was also cited.

The state's revenue reserve fund was $1.4 billion at the end of fiscal 2015, up from $103.7 million in 2009, according to Fitch.

Public Resources Advisory Group is the state's financial advisor.

Gray Pannell & Woodward LLP is bond counsel. Kutak Rock LLP is disclosure counsel.

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