TxDOT Saves Record 21% on $1.6B Toll Refunding

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DALLAS — Texas achieved the greatest savings on a single bond deal in the state's history through a $1.68 billion refunding that priced Jan. 21, officials said.

In terms of net present value, the savings came to $380 million, representing more than 21% of the amount of debt refunded, said Benjamin Asher, head of innovative financing and debt management for the Texas Department of Transportation.

"On a gross basis, the savings total $948 million," he said. "This is the largest amount of savings ever achieved through a single refunding transaction in Texas."

The deal refunded nearly all of the outstanding debt for the Central Texas Turnpike System, first issued in 2002.

Robert Hillman, director at Barclays, was lead banker on the deal, with Paul Jack, executive vice president of Estrada Hinojosa & Co. as financial advisor.

Issued in two tiers, the bonds carried two sets of ratings. The first tier earned upgrades by Moody's Investors Service to A3 from Baa1 and by Fitch Ratings to A-minus from BBB-plus. Standard & Poor's maintained its A-minus rating.

The second-tier bonds carried new ratings of Baa1 from Moody's Investors Service, BBB-plus from S&P and BBB from Fitch.

"The department benefitted from historically low interest rates as the overall borrowing cost was 4.09% for debt with an average life of 21.4 years," Asher said. "There was considerable investor interest in the bond issue with over 90 different institutional investors submitting over $5 billion of orders."

With the refunding, TxDOT is paying off the CTTS' $900 million TIFIA loan which is also the largest TIFIA loan repaid to date, Asher said.

Moody's analyst Maria Matesanz attributed the upgrade on the CTTS first-tier bonds to stronger than forecasted growth in traffic and revenues in the economically strong Austin area.

"The Baa1 for the second tier bonds reflects their subordinate claim on pledged revenues and weaker legal covenants and reserves," Matesanz said. "After the refunding, the aggregate debt will be split approximately 50/50 between the senior and second-tier liens."

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Transportation industry Texas
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