The Oklahoma Supreme Court validated the Oklahoma Turnpike Authority’s $480 million of bonds after a legal challenge.

DALLAS – The Oklahoma Turnpike Authority plans to price up to $480 million of toll revenue bonds in January after gaining state Supreme Court approval.

The court's ruling that the bonds were properly authorized under the state constitution came Tuesday, a day before the Federal Reserve's Federal Open Market Committee approved an interbank interest rate hike of 25 basis points.

OTA finance director Wendy Smith said the state agency plans to be in the market mid-January.

As for the Fed rate hike, "they'd already built that into the market," she said of the finance team working on the deal.

Smith said the higher yields will not prevent OTA from issuing debt. The state Legislature authorized up to $480 million, but OTA expects the deal to come in around $420 million.

Awaiting the state Supreme Court's approval forced OTA to delay the issue that could have come to market in late October or early November, ahead of the election.

Interest rates have moved against issuers since the election of Donald Trump as president on Nov. 8.

The Fed's Wednesday rate hike came a year after its first rate increase in nearly a decade. Fed chair Janet Yellen said the Fed expects three more interest rate hikes of similar size in 2017, a more aggressive schedule than previously expected.

Oklahoma Bond Advisor James Joseph said the Fed's rate hike plans for 2017 are not a sure thing.

"As you know, the forecast was for four hikes in 2016 and there was only this one," he said. "There is still a lot of uncertainly about how inflationary the new administration's programs will be – assuming they are implemented."

Oklahoma City attorney Jerry Fent had challenged the constitutionality of the OTA's bond issuance plans.

Fent claimed that the authorizing legislation violated the state constitution's ban on "logrolling" or combining more than one issue in a single bill because it funded multiple turnpike projects. Fent also said bond maturities of 46 years violated the so-called "rule against perpetuities."

The court ruled against Fent on both issues.

For OTA, the bond deal is a critical step in advancing its Driving Forward capital plan and one of the largest from the Sooner State this year. Proceeds will help pay for a new east Oklahoma County toll road and improvements on the Gilcrease Expressway, the Muskogee Turnpike, the Turner Turnpike, the H.E. Bailey Turnpike and the Kilpatrick Turnpike.

New turnpikes are designed to relieve congestion on the fast growing south side of Oklahoma City, particularly on Interstate 40.

In September, the authority voted to increase toll rates to pay for the entire Driving Forward program, which is expected to cost about $935 million and require debt issuance of up to $1.1 billion.

With the court's approval of the bonds in hand, OTA will raise toll rates 12% on Feb. 1, the agency announced.

Another 2.5% increase is planned for Jan. 1, 2018, and an additional 2.5% increase will take effect July 1, 2019, officials said.

The OTA bonds will carry ratings of Aa3 from Moody's Investors Service and AA-minus from S&P Global Ratings.

Michael Newman, senior vice president for First Southwest/Hilltop Securities is financial advisor on the OTA deal.

John Moore, vice president for Wells Fargo, is lead banker.

In addition to financing the new tollways, bond proceeds will be used to refund portions of the Series 2007A bonds and privately-placed 2016A bonds. As of Dec. 31, 2015, OTA had $949 million in debt outstanding, according to Moody's.

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