BRADENTON, Fla. — Orange County, Fla., will sell $40.2 million of public service tax refunding revenue bonds competitively on Tuesday after upgrades ahead of the deal.
It may be the only time Orange County is seen in the bond market this year unless new refunding opportunities arise, according to Fred Winterkamp, manager of fiscal and business services.
The county is planning a tourist tax refunding, but that will be placed with a bank because its size doesn't warrant the expense of being sold in the bond market, he said.
Tuesday's deal is preliminarily structured with non-callable serial maturities between 2014 and 2025, though bidders can take advantage of a term bond option by designating two or more consecutive years into a single maturity.
The bonds are secured by a public service tax on the purchase of electricity, gas, water, and fuel oil in the unincorporated areas of the county.
"The remarkable thing about this transaction that stands out is we're at seven times coverage on the maximum annual debt service, the descending debt service schedule, and this is essentially a 12-year non-callable deal," Winterkamp said.
The strong debt service coverage was one factor that led Moody's Investors Service to raise its rating on the public service tax bonds to Aa2 from Aa3, and for Standard & Poor's to raise its rating to AA from AA-minus. Fitch Ratings maintained its already higher AA-plus rating.
Analysts also said no new parity debt is contemplated, and the bonds have an above-average payout schedule.
Fitch also affirmed Orange County's triple-A implied general obligation rating, and its AA-plus rating on $55.6 million of outstanding PST revenue bonds.
Winterkamp said the refunding is expected to exceed the county's minimum threshold of 4% for refundings. The pre-pricing projections estimate present value savings of $4.4 million or 8% of refunded par amount.
Nabors, Giblin & Nickerson PA and Ruye H. Hawkins PA are co-bond counsel for the transaction. Greenberg Traurig PA and Debi V. Rumph are co-disclosure counsel.
No rating was obtained from Kroll Bond Rating Agency for Tuesday's offering as it was for the county's last deal - $210.2 million of sales tax revenue refunding bonds sold in September.
Winterkamp said Kroll did a "very good job" reviewing last year's transaction, but Tuesday's deal is smaller, it represents the last bonds outstanding against the PST revenue, and its diminishing amount of debt service going forward did not lend itself to "expanding the message in the market at this time" with an additional rating.
Last year's sales tax refunding still has $300 million of bonds outstanding, he said.
"We wanted people in the marketplace going forward to understand all the voices about that credit," Winterkamp said.
Kroll and Fitch gave the 2012 deal AA-plus ratings. Moody's rated the debt Aa2, upgrading it from Aa3, and Standard & Poor's assigned a AA rating.
That transaction resulted in an all-in true interest cost of 1.91% and present value debt service savings of $35 million, or 13.8% of the refunded and defeased par amount, according to an analysis by Public Financial Management Inc., the county's financial advisor. The pre-sale estimate of savings was $16.5 million or 13.7%.
"It was a wonderful sale, and it far exceeded expectations," Winterkamp said. "I wouldn't have changed anything."
