CHICAGO - Despite reservations about a still-weak market and uncertainty surrounding the federal highway trust fund, Ohio this week sold $375 million of grant anticipation revenue vehicle bonds, its largest Garvee deal ever.
State officials late last week had considered scaling back the bond issue to around $160 million. But after gauging strong interest in the debt, the state decided to sell the entire $375 million, according to state Treasurer Richard Cordray. He said retail investors purchased $240 million, or 64%, of the transaction, which in turn sparked interest from institutional investors.
"We are especially proud to have completed this transaction in what has been a very volatile municipal bond market that has made it difficult for many states and local governments to raise the resources needed for their operations and capital projects," Cordray said in a statement.
Ohio achieved a true interest cost of 4.99% on the bonds, according to officials. The bonds sold to institutional investors yesterday captured yields that ranged from 3.25% with a 5% coupon in 2010 to 5.60% with a 5.5% coupon in 2020.
Morgan Stanley was senior manager on the transaction.
The deal comes two weeks after Ohio sold $240 million of infrastructure revenue bonds, of which $180 million went to retail investors, who have stepped in to partially fill the void left by institutional investors that had shunned the market in recent weeks.
The Garvees are secured by the state's share of payments under the Title 23 federal aid highway program. Some issuers have recently postponed their Garvee deals as the federal government last month said the fund was running out of money and it may have to begin rationing its reimbursements to states.
Ohio officials felt confident that the Garvees would sell despite the funding uncertainties, in part because of their strong debt service coverage of more than five times.
Proceeds from the transaction will finance 24 road and bridge projects across the state.
"It's our hope that this will open the door for others who rely on these capital issuances to fund their projects in these difficult economic times," Cordray said.