DALLAS — The Arizona Transportation Board has switched lanes to adjust to market conditions, planning to substitute a senior-lien excise tax revenue bond issue for a subordinate-lien highway revenue bond sale that had been expected this week.
The board uses two types of bonds to finance highway construction: highway user revenue fund bonds backed by the state fuel tax and other fees, and excise-tax revenue bonds backed by sales tax in Maricopa County.
Board officials said they plan to competitively sell $157 million of senior-lien excise tax revenue bonds to take advantage of market conditions for the more highly rated senior-lien bonds. The deal would come in late September or early October.
It must still be formally approved by the board.
Earlier, the board had approved the competitive sale of up to $185 million of subordinate-lien highway tax revenue bonds, but officials said that deal is off the calendar and will be replaced by the senior-lien excise tax-backed bonds. The Bond Buyer last week incorrectly reported that the subordinate highway revenue bonds would be sold this week.
Standard & Poor’s rated the upcoming senior-lien excise tax revenue bonds AA-plus with a stable outlook. Moody’s Investors Service has not yet issued a rating for the forthcoming deal. No rating from Fitch Ratings is planned.
Earlier, Moody’s downgraded $1.27 billion of board senior-lien highway revenue bonds to Aa1 from Aaa, and dropped $330 million of outstanding subordinate-lien highway revenue bonds to Aa2 from Aa1.
The Moody’s downgrade applied to the highway user revenue fund bonds and was prompted by legislation enacted as part of Arizona’s 2012 budget, according to analysts.
“The legislation changes the allocation of highway user revenues, significantly reducing the deposits into the State Highway Fund, which secure the highway revenue bonds,” Moody’s analysts wrote. “As a result, coverage of maximum annual debt service by pledged revenues will drop below the additional bonds test requirements for both the senior and subordinated bonds.”