DALLAS — Louisiana’s financial adviser said the timing of Tuesday’s competitive sale of $300 million of general obligation bonds put the issue into a market starved for high-quality public debt offerings.
The State Bond Commission met in a special session after the sale to accept a bid from Barclays Capital Inc. of a true interest cost of 3.87%.
Freda Johnson of Government Finance Associates Inc., the state’s financial adviser, said the spread between Barclays’ bid and the highest bid was only nine basis points.
There were seven bids.
“It was an extraordinarily good sale,” Johnson said. “All the big boys put in bids. Not only did the state obtain a very good true interest cost, but the winning bidder included a premium of $27 million. We are very pleased.
“The Bond Buyer said on Monday that there would be a very low volume of debt going to market this week. It has been a low couple of months. There is no doubt that this sale benefited from the lack of volume.”
“Louisiana is a strong credit,” Johnson added. “Like most other states, Louisiana is looking at a revenue shortfall in fiscal 2012. But unlike many other states, the shortfall is manageable.”
Louisiana’s budget shortfall for next fiscal year is estimated at $1.6 billion, but recent revenue increases may lower the gap to $1.5 billion or less.
The bonds are rated Aa2 by Moody’s Investors Service and AA by Fitch Ratings.
Co-bond counsels include Foley & Juddell LLC, Phelps Dunbar LLC, and Attorney General James D. Caldwell.
Proceeds will replenish the state’s comprehensive capital outlay escrow fund that finances projects on a list developed by the governor and legislature.
The commission authorized a select committee to approve bids for underwriting on the sale of $200 million of state variable-rate general obligation bonds issued in 2008.
The letter of credit for the bonds, which was provided by BNP Paribas, will expire July 17.
The selection committee consists of representatives from the governor’s office, the Department of Administration, House Speaker Jim Tucker, Senate President Joel Chaisson Jr., and the State Treasurer’s Office.
Commission Director Whit Kling Jr. said the refinancing bonds, which will be issued as floating-rate debt linked to one-month London Interbank Offered Rates, must be issued by June 1.
He said selecting the underwriting team at the April commission meeting would make it difficult to take the issue to market as scheduled.