Georgia plans to issue $1.57 billion of general obligation bonds next week.
The competitive sale's bids are due on June 24, with an award date following the next day. The expected closing date for the deal listed as July 9. All dates are "subject to change" according to the preliminary official statement.
Dana Pope, director of financing and investment for the Georgia State Finance and Investment Commission', said the commission wants to ensure it does its due diligence before the bid goes live. The commission will pay close attention to
"We look at all the economic data," Pope said. "We know we will sell in June."
It's Georgia's first GO deal
The deal consists of three series. The 2026A bonds series is $620.51 million, the 2026B series is $160.46 million and 2026C series is $790.125 million.
The interest for each series is exempt from Georgia's state income tax, and interest is federally tax exempt for the 2026A and 2026C bonds. The 2026B bonds are federally taxable.
The 2026A and 2026B bonds will have semi-annual interest payments on January 1 and July 1, beginning in 2027 through maturity. Both bonds mature on July 1, beginning on July 1, 2027, through July 1, 2046 — according to the State of Georgia's online investor presentation for the deal.
PRAG is municipal advisor for the deal. Gray Pannell LLC is bond counsel.
The presentation broke down the state's targeted capital projects for investment. The bonds will devote funds to the following areas: $327.365 million for K-12 education, $238.63 million for higher education, $158.16 million for public safety, $72.85 million for economic development, $33.2 million for water loan programs and $17.83 million for other capital projects.
Education comprises more than 50% of the allocation of capital from 2026A and 2026B.
"Education's always a majority of funding for states, states' bonds and I guess it parallels with [national] state funding overall," she said. "We're not different from other states. Education's just always a priority."
The 2026C will also have semi-annual interest payments; however, payments will start on June 1 and December 1 and will begin Dec. 1, 2026, through maturity. These bonds mature on each December 1, beginning Dec. 1, 2026, through Dec. 1, 2034.
The 2026C bonds will "refund certain outstanding GO bonds to provide debt service savings" according to the investor presentation. The proposed refunding targets include 2013H, 2014A, 2015A and 2016A.
The bonds were rated AAA by S&P Global Ratings and Fitch Ratings, and Aaa by Moody's Ratings. These high ratings coupled with Georgia's solid credit history and a high-demand muni market set the stage for competitive bidding.
"I expect there to be tremendous interest in this loan, both from a retail and institutional investor perspective," said The Bond Buyer's Market Intelligence analyst, Jeff Lipton. "I would not be surprised if the deal gets oversubscribed."
Underwriters and investors are historically interested in Georgia munis because of the state's solid finances. Pope highlighted some of the main contributing factors to the state's "large diverse growing economy" which includes a strong transportation structure, growing population, significant reserves and limited well-managed liabilities.
She pointed to one trade publication that has named Georgia as the
The commission is also structuring the deal in a way that mitigates risk for interested parties, by breaking the deal into five separate auctions.
"We tranche the bids to try to help, so there's not a single underwriter having to take a lot of risk on," Pope said. "Our 2026A $600+ million is tranched out, so about $300 million per bidding group."
Even though Georgia's income tax rate was cut
"This was already built into the governor's estimate to start the budget process this General Assembly session, and then you know we'll just continue to look at estimated revenues coming in and respond accordingly," she said. "Our debt service ratios are very low, we're at about 3.1% or 3.2% of outstanding GOs to our prior year revenues, so we expect to keep those low."
Georgia historically sold a sizable
Over the past couple of years, Pope said Georgia was able to rely on its "strong fiscal position" in order to fund capital projects with cash; however, after using all of their COVID-19 relief revenues from the federal government and other national factors, many states are going back to funding capital investments with GO bonds.
"[States] had the coffers full from COVID revenues...and with the economy exploding out of COVID a lot of states haven't had to come to market," Cumberland Advisors' Executive Vice President and Chief Investment Officer John Mousseau said. "Now they're coming to market."
Georgia's conservative budgeting and fiscal management also has heavily influenced its ratings. Lipton said that the state has no need to hide behind "fiscal gimmicks" because its credibility and reliability are proven by "conservative fiscal management practices that are embedded within the state."
As the deal prepares to go live, confidence on the issuer side seems to be at an all-time high, and Lipton believes that the sentiment is not misguided.
"Georgia hits the AAA checklist for state GOs across the board," he said.
