CHICAGO - The Illinois State Toll Highway Authority expects to enter the market today with between $300 million and $400 million of fixed-rate, new-money revenue bonds to raise funds for its ongoing $6.2 billion rebuilding of the tollway system.
The deal is expected to price on the same day as a hearing is scheduled on the proposed $1.8 billion second phase of the capital program that was announced last month by toll officials and Gov. Rod Blagojevich, and a day ahead of a hearing on the authority's proposed 2009 budget.
Although the new-money sale was long anticipated, officials were watching the market given its recent turmoil and decided only recently to move on the transaction, so rating agency reports were not released by press time yesterday.
All three were expected to affirm the authority's ratings of Aa3 from Moody's Investors Service and AA-minus from Fitch Ratings and Standard & Poor's. The agency has $3 billion of outstanding senior-lien debt.
JPMorgan is the book-running senior manager on the deal and Citi is co-senior manager. Another 12 broker-dealers including Wall Street, regional, and minority-owned firms round out the underwriting group.
The team was selected from firms on a pre-qualified list of senior and co-managers with the goal of appealing to a broad range of potential investors, according to tollway finance chief Mike Colsch. The authority did not use a financial adviser on the deal.
The deal, with a 2033 term bond and mandatory sinking fund payment in 2032, was tentatively sized at $300 million, but the agency is authorized by its board to go as high as $400 million "if there is strong demand for the bonds," Colsch said. "Market issues have persuaded us to sell a smaller amount than we may have during a stronger market. We do feel the market has been strengthening, and we anticipate a good response to our offering."
The tollway agency is issuing new-money debt on an as-needed basis through 2010 to finance the $6.2 billion capital program. It relies on $3.5 billion of bonding backed by toll revenues.
First announced in 2004, the program grew last year by about $1 billion due to the addition of $750 million of congestion-relief projects, increased construction costs, and the extension of final project construction by two years to 2016.
Under the capital program, roads are being rebuilt and extended, toll plazas are being altered to accommodate electronic tolling and relieve congestion, and a new interstate highway is being built. The original plan relies on increased revenue collected from the doubling of tolls paid by motorists who don't use the I-PASS device.
Officials last month unveiled the $1.8 billion, bond-financed second-phase of the congestion relief program. It includes plans for a new interstate-to-interstate interchange, the rebuilding of another interchange and the addition of bus and ride-sharing commuter lanes to the busiest stretches of the 286-mile toll system.
The agency intends to issue junior lien bonds to finance the program, including $100 million next year. The debt would be repaid with additional revenues that would be collected from a toll increase for commercial vehicles and single-passenger cars that use the new lanes.
"The Illinois Tollway has the solid financial foundation and the engineering capabilities to immediately begin the process of building these long-awaited interchange improvement projects," authority board chairman John Mitola said in a statement. The board is expected to vote on the second phase at its meeting later this month.
The 2009 budget includes $258 million for operating costs and more than $1 billion for the capital program. The board will vote on the budget at its meeting next month.