BRADENTON, Fla. — Florida today expects to complete negotiated pricing of $263.4 million of Florida Forever revenue bonds, representing the last debt authorized for the state’s long-running environmental and conservation land-protection program.
Proceeds of the uninsured 20-year bonds will be used to finance the acquisition of land and water areas for restoration, conservation, recreation, and water protection.
The deal is expected to be structured as $78.8 million of tax exempt bonds, Series 2010A, maturing through 2017, and $184.6 million of taxable Build American Bonds, Series 2010B, maturing between 2018 and 2029.
Retail sales began yesterday and by mid-afternoon $57 million in retail orders had been received, acording to Ben Watkins, director of the state’s Division of Bond Finance. No pricing details were available at press time, but the sale concludes today with institutional pricing.
Florida has sold environmental bonds for years secured by 63.31% of the documentary stamp taxes collected by the state.
Most of the taxes are collected on the transfer of real estate, one of the sector’s hardest-hit in the current recession. Debt service coverage levels on Florida Forever bonds has dropped from a high of 6.37 times to 1.58 times, Watkins said.
The diminished coverage level prompted lawmakers last year to allow the remaining documentary-stamp tax collections, not previously dedicated to the Florida Forever program, to be available as a backstop for the issuance of today’s bonds.
“What that does is it makes significant money, in addition to the pledged revenues, available to make debt service payments,” Watkins said, noting that the additional security for the bonds is expected to increase coverage to more than two times.
All three major rating agencies noted the volatility of the tax securing the bonds, but also cited legislative actions to improve security for the debt.
The bonds received stable outlooks and ratings of A-minus from Fitch Ratings, A1 from Moody’s Investors Service, and AA-minus from Standard & Poor’s. Those ratings also were affirmed on $2.4 billion of outstanding debt.
“The stable outlook reflects our belief that pledged revenues continue to support coverage of maximum future debt service that is adequate for the rating, despite the prolonged decline in pledged revenues,” said Standard & Poor’s analyst Robin Prunty. “The state Legislature’s recent actions to increase the distribution of revenues pledged to the bonds and provide additional revenues to support debt service, combined with Florida’s ability to manage the size and timing of future bond issues, are credit strengths in our opinion, and help mitigate concerns about future debt authorizations.”
Today’s offering is based on a legislative authorization granted two years ago.
Because of the decline in documentary stamp taxes lawmakers did not authorize any new debt last year for the program. But environmentalists are pressing the Legislature this year to reinstitute the debt program.
Bank of America Merrill Lynch is the book-runner for today’s sale. Other participants are BB&T Capital Markets, Citi, Fidelity Capital Markets, JPMorgan, Loop Capital Markets LLC, Morgan Keegan & Co., Morgan Stanley, Raymond James & Associates Inc., and Siebert Brandford Shank & Co. LLC.
Bond counsel is Squire, Sanders & Dempsey LLP and underwriters’ counsel is Nabors, Giblin & Nickerson PA.