CHICAGO — The Illinois State Toll Highway Authority will head into the market this fall with the sale of up to $300 million of toll-backed revenue bonds in a deal that will mark the final financing planned for its five-year-old $6 billion capital program.
The authority’s board late last week signed off on the transaction and the team selected to underwrite the deal. JPMorgan and Loop Capital Markets LLC are senior managers. The team was compiled from a new list of 12 qualified senior managers and 14 co-managers, although senior managers may also serve as co-managers.
The other 10 firms named to the senior manager’s pool are Barclays Capital, BMO Capital Markets, Citi, Goldman Sachs & Co., Jefferies & Co., Banc of America Securities-Merrill Lynch, Mesirow Financial Inc., Morgan Stanley, Siebert Brandford Shank & Co., and William Blair & Co. The pools were established following a request for proposals process last month. The term runs for two years.
Barclays, Cabrera Capital Markets, Duncan Williams Inc., Fidelity Capital Markets, Goldman, Melvin Securities LLC, PNC Capital Markets and Siebert were named co-managers on the upcoming sale.
New board member William Morris, a public finance banker, voted against adopting the list of underwriting firms because he believed a handful of qualified firms should have been included. However, the tollway authority was limited by state rules governing the number of contractors that could be included.
“All the firms on both lists are qualified, but my issue is with the process that leaves some excellent firms off the senior manager list and small and emerging firms off the co-manager list,” Morris said.
Structural details on the transaction were not available by press time. The authority sold $500 million of new-money in May tapping the federal stimulus’ Build American Bond program. It is also contemplating restructuring its nearly $1.5 billion of synthetically fixed, variable-rate bonds issued over the last five years for the new program.
The agency has a total of $3.8 billion of debt, including $3.4 billion sold to fund the $6 billion program to rebuild and expand the 286-mile tollway system and shift to open-road tolling with an electronic system to relieve congestion at tollbooths.
The tollway’s bonds are rated AA-minus with a negative outlook by Fitch Ratings, while Moody’s Investors Service rates them Aa3 with a stable outlook and Standard & Poor’s rates the credit AA-minus and stable. Net revenues of the system secure the bonds. Fitch changed the outlook to negative earlier this year due to a potential drop in debt-service coverage levels if toll revenues fail to grow rapidly.
The capital program has generally won favorable reviews, but the agency has come under scrutiny from lawmakers and federal authorities for some of the contracts awarded, including ones given to contributors to indicted former Gov. Rod Blagojevich’s campaign coffers.
Last fall, the toll authority and Blagojevich announced a $1.8 billion second phase to the capital program that calls for the construction of car pool or “green lanes,” an interchange at the Tri-State and I-57, improvements to the I-290/I-90 interchange, and other projects.
In the federal government’s corruption case against the former governor, he is accused of using that program and the promise of future capital spending to shake down contractors for contributions ahead of a new law that took effect in January limiting contributions from state contractors. The authority has put the green lanes on hold but may revisit some projects in the future.
The agency will hold public hearings later this month on its proposed $696 million budget for 2010. About $265 million covers the operating budget, $231 million is earmarked for debt service and the remainder along with bond proceeds and capital reserves will fund $341 million in capital projects.
The operating budget is up 3% over the 2009 plan due to increasing pension and health care costs. The authority expects an increase in revenues as work on the capital program wraps up.
“In 2009, the Illinois Tollway made significant progress toward fulfilling its promise to Illinois drivers to provide systemwide improvements on schedule and on budget, as we reach the 80% complete mark for the major road projects outlined in the congestion-relief program,” new board chairwoman Paula Wolff said in a statement. “In 2010, engineers, construction crews and support staff will continue to focus on completing road projects as the tollway’s other departments work to improve customer services for I-PASS users, tollway oases visitors and other drivers.”
Morris and Wolff were named by Gov. Pat Quinn this past summer to join the board.