BRADENTON, Fla. — Tennessee plans to price $210 million of new and refunding general obligation bonds Wednesday in the gilt-edged state's first foray into the market in two years.
The bonds are being sold to refinance commercial paper used to fund capital projects and to refund some bonds for debt service savings. The offering is structured as $130 million of Series A new money bonds and about $80 million of refunding bonds, depending on market conditions.
The Series A bonds will mature serially between 2015 and 2034.
In keeping with Tennessee tradition there will be no term bonds, said Sandra Thompson, director of the Office of State and Local Finance.
"The state's practice is always to amortize debt at level principal. The refunding matches the refunded debt." she said Monday. "The state's debt is pretty straightforward and easy to understand."
The Series B bonds will refund some maturities of the state's 2008A and 2009C GO bonds maturing between 2025 and 2030. Thompson said the refunding is expected to exceed the state's debt management policy requirement that aggregate net present value savings be at least 4%.
"We are hoping that we will have good investor interest since we haven't been in the market since late 2012," she added. "We'd like for our readers to go to our website —
Ahead of the deal, the state received affirmations of its triple-A ratings from Fitch Ratings and Moody's Investors Service, and its AA-plus rating Standard & Poor's.
All three have stable outlooks on the state's debt, which includes $1.8 billion of outstanding GOs.
"Tennessee's AAA GO rating reflects its low debt levels, among the lowest of any state, and an ongoing commitment to budget balance," said Fitch analyst Douglas Offerman. "Conservative fiscal management has been in evidence repeatedly over the last decade, including in the state's proactive approach to maintaining fiscal balance and preserving flexibility in the form of budget reserves."
Moody's analyst Julius Vizner said its Aaa rating also reflects low retirement liabilities and its positive financial reserves.
"A key credit strength of Tennessee is that it is, and has historically been, a low debt state," Vizner said. "Tennessee ranked 45th lowest in terms of debt relative to its size, according to our 2014 Debt Medians Report."
The state's debt service costs to available revenues was 1.5% as of fiscal 2013 and is significantly lower than the average of 5.3%, according to Moody's.
"Debt levels will remain low as the state has no significant bonding plans, funds transportation infrastructure on a pay-as-you-go basis, and has no unemployment trust fund loans outstanding," said Vizner.
The state's financial advisor is Public Financial Management Inc.
Morgan Stanley & Co. is senior manager for this week's transaction. Co-managers are Bank of America Merrill Lynch, Piper Jaffray, and Wells Fargo Securities.
The selling group consists of Avondale Partners LLC, FTN Financial Capital Markets, Edward Jones, Harvestons Securities, J.J.B. Hilliard, Robert W. Baird, Duncan Williams, and Stephens Inc.
Hawkins Delafield & Wood LLP is bond counsel. Bass, Berry & Sims PLC is counsel to the underwriters.
The Tennessee State School Bond Authority will be in the market in August to price about $65 million of new money bonds and $190 million of taxable and tax exempt refunding bonds.
