DALLAS - The Kansas Development Finance Authority is taking a three-part, $130.2 million revenue bond package to market this week to finance a number of state projects, including the next phase of renovations at the state capitol.
The negotiated sale will include $87.6 million of tax-exempt bonds, $32.5 million of taxable Build America Bonds, and $10.2 million of taxable bonds.
The schedule calls for a retail order period today, with institutional sales set for Thursday.
Co-senior underwriters are Piper Jaffray & Co. and George K. Baum & Co. Co-managers are Stern Brothers & Co. and Robert W. Baird & Co.
Columbia Capital Management LLC is financial adviser to the finance authority.
The bonds, which are supported by annual legislative appropriations, are rated Aa2 by Moody's Investors Service and AA by Standard & Poor's.
Stephen Weatherford, president of the KDFA, said the BABs, for which the issuer will receive a federal subsidy, provide benefits to both issuers and investors.
"BABs are certainly appealing to investors, who get a higher rate of return than they would on a conventional municipal credit," he said. "The 35% interest-rate direct subsidy for issuers gives us, at certain points on the curve, a lower cost of borrowing than could otherwise be obtained. We used BABs only where they would give us those lower borrowing costs."
The KDFA-issued BABs carry a 10-year call provision, accordding to Weatherford.
"We considered a shorter call period, but we had to take into account the price of the call," he said.
The sale includes a $10.2 million segment of conventional taxable debt due to inclusion of a pharmacy school project at the University of Kansas's main campus at Lawrence, Weatherford said.
"The new pharmacy school will have a bit of a mixed use, and we include the taxable segment to allow the university to take advantage of public-private partnerships," he said. "We couldn't use BABs for this, because BAB proceeds are limited to the same sort of restrictions on private activity as conventional public debt."
Proceeds will provide $38.8 million for the fifth and final phase of the $285 million project to restore and renovate the state capitol, which was completed in 1903.
The bonds are the ninth series issued by the KDFA for the project, totaling $175 million. The Legislature has authorized the authority to issue a maximum of $249 million of bonds for the effort, but the KDFA said it expects the Legislature to increase its capacity to finish the project.
Weatherford said the proceeds from this week's sale will not compete the project, but would provide funds for the next 12 to 18 months of work.
Approximately $30 million of the proceeds are allocated to the construction of a new School of Pharmacy at a cost of $55.8 million. The KDFA issued $15.6 million of bonds for the project in 2008.
The new facility is under construction, and is scheduled to open for the fall semester in 2010.
Other allocations include $1.7 million for a new state office building and $29.7 million to refund variable-rate bonds issued in 2002.
Weatherford said the refunding would take out the authority's remaining variable-rate debt.