DALLAS - The Louisiana State Bond Commission delayed a decision yesterday on a planned May sale of $685 million of gasoline and fuel tax bonds after transportation department officials asked for more time to negotiate a financing plan for the bonds.

State Treasurer John Kennedy, chairman of the Bond Commission, said he removed from the agenda an item seeking authorization to publish a notice of sale for the bonds after officials with the Department of Transportation and Development said a comprehensive plan was not available.

"The people at DOTD told me they were not ready to make a presentation, and we all agreed to pull that item," Kennedy said. "I anticipated there would be a lot of questions, so I told them I'd call a special session of the commission whenever they are ready to go forward."

The state had planned to issue $485 million in late 2008 to finance the final projects in a multi-year, $5.2 billion road and bridge program. The Transportation Infrastructure Model for Economic Development, or TIMED, program was approved by voters in 1989.

However, the commission voted in October 2008 to delay the sale until May 1 because of bad market conditions and to avoid a termination fee on eight swap agreements with four providers, which at that time amounted to $25 million. When the commission delayed the sale, director Whit Kling Jr. was authorized to terminate the swaps if the fee dropped below $10 million.

The swap termination fee is now approximately $140 million, and has been as high as $235 million.

The publication notice would have called for selling $685 million of the bonds, supported by four cents of the state's fuel taxes, with the $200 million of additional proceeds allocated to the swap termination fees.

"That item was open-ended with few specifics," Kennedy said. "We will know more soon. DOTD is working with the banks, as is Commissioner of Administration Angèle Davis. I think we'll have something soon."

The Bond Commission authorized a forward purchase delivery contract for the bonds in December 2006 with underwriters Morgan Keegan & Co. and Citi. Counterparties are Morgan Keegan Financial Products with 50% of the swap, Merrill Lynch Capital Services with 25%, and Citibank NA and JPMorgan Chase Bank with 12.5% each.

The bond issue was originally structured as variable-rate debt with the swaps and the bonds enhanced with insurance from CIFG Assurance North America Inc. and XL Capital Assurance Inc., now Syncora Guarantee Inc., which have been downgraded below triple-A status.

Kennedy said he did not know how the deal would be restructured.

"I'm not privy to all of that," he said. "When we get something from DOTD, the commission will deal with it."

The next scheduled meeting of the Bond Commission is March 16.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.