Kansas Agency Selling First Part Of Deal for Biohazard Facility

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DALLAS — The Kansas Development Finance Authority will go to market today with the first sale from a $105 million state authorization that will partially finance a federally operated biohazard research facility, as Moody’s Investors Service lowered its outlook on the state to negative from stable.

The agency is selling a total of $109 million of state revenue bonds, which includes $32 million of new money from the authorization. The $109 million is made up of $64.9 million of 25-year tax-exempt bonds, $25.8 million of 15-year taxable Build America Bonds, and $18.3 million of 20-year taxable bonds.

The bonds are set for retail pricing today, with institutional sales on Thursday. They are supported by annual appropriations by the Kansas Legislature.

Proceeds will provide $77 million for refunding of outstanding debt and $32 million of new money for the National Bio and Agro-Defense Facility being built at Kansas State University in Manhattan. 

The Legislature has authorized a total of $105 million of state revenue bonds for the $650 million research facility, which will be owned by the federal government and operated by the Department of Homeland Security.

The bonds are rated AA by Standard & Poor’s, which also affirmed its AA-plus issuer rating for Kansas with a stable outlook.

Moody’s maintained its Aa2 rating on KDFA’s revenue debt and Kansas’s issuer rating of Aa1, but lowered the outlook on $1.5 billion of state appropriations-back debt and pension obligation bonds to negative due to the ongoing budget shortfall.

George K. Baum & Co. is the lead underwriter for the bonds.

Other members of the underwriting team are Jefferies & Co., JPMorgan, Oppenheimer & Co., Stern Brothers & Co., and Wells Fargo Securities. UBS Financial Services Inc. will be responsible for the retail distribution activities of JPMorgan.

Bond counsel for the KDFA is Gilmore & Bell PC. The financial adviser is Columbia Capital Management LLC.

Jim MacMurray, vice president for finance for the authority, said there is no fixed schedule for selling the remaining $73 million of bonds authorized for the biohazard research facility.

“It will depend on the progress of the project,” he said.

MacMurray said $14 million of the refunding money will be used to restructure debt that would mature in 2010 into long-term debt to alleviate pressure on current state budget. That effort is not being done for overall economic savings, he said. The remaining $63 million refunding effort is expected to yield savings of between $2.5 million and $3 million, MacMurray said.

The 500,000-square-foot research facility will replace an obsolete federal facility at Plum Island, N.Y. It is to be operational by 2015. The federal facility will focus on protection of the nation’s food supply and agricultural economy from biological threats such as foot-and-mouth disease and swine flu. It will contain laboratories staffed by researchers from the U.S. departments of Homeland Security, Agriculture, and Health and Human Services.

The new facility is intended to enhance the ability to develop vaccines, drugs, and other countermeasures against livestock diseases and animal diseases that can infect humans. Manhattan was selected as the site for the new lab after a three-year review that included intensive evaluations of 18 proposals in 11 states.

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