Louisiana Commission Awards Additional GO Zone Capacity

DALLAS — The Louisiana State Bond Commission on Tuesday awarded all the state’s dwindling capacity for Gulf Opportunity Zone bonds to two projects in anticipation that GO Zone bonds already allocated to other projects will be returned to the pool.

The commission was meeting in special session to officially accept bids for two series of state general obligation refunding bonds. It will meet in regular session on Oct. 21.

Whit Kling Jr., executive director of the Bond Commission, said a total of $6.3 billion of GO Zone bonds have been issued from the state’s allocation of $7.8 billion. Another $1.4 billion of the tax-exempt private-activity bonds has been allocated but must be issued before the program expires at the end of 2010.

“As of this morning, we had $187 million in available GO Zone bond capacity,” Kling said. “The indications are that one project will return its allocation because the bonds couldn’t be sold, and another one probably won’t be able to close but they haven’t yet agreed to return their allocation.”

Kling said the available GO Zone bond capacity could be as much as $750 million by the next meeting, including the current $187 million, if the unsold allocations are returned.

The commission’s preliminary approval of requests by Valero Energy Corp. and Georgia-Pacific LLC will be considered for final approval at the regular October session and in ­November.

Georgia-Pacific will receive the $50 million it sought. Valero asked for $300 million but received $127 million, with the promise of more if additional capacity becomes available

The agenda included five requests for bonds totaling more than $1 billion, four of them from companies that have already received the commission’s maximum allocation of $300 million.

Valero directors will meet in early November to decide whether to proceed with the project to expand the company’s refinery in St. Charles Parish, according to Kling.

The commission limited its approval to expire at midnight on Nov. 8.

Valero had submitted a request for GO Zone bonds earlier, he said, but withdrew its proposal before the commission could review it.

Kling said several companies applied for bonds and then withdrew their requests before refiling amended proposals.

“The record is five times for one company,” he said.

State Treasurer John Kennedy, chairman of the commission, said the situation has been caused by the weak economy.

“It’s not bad faith by the applicants,” he said. “The capital markets have been in such disarray for the past couple of years that it has been hard to get even a good deal done.”

“There’s so much fear out there that the investors look only for the very best credits,” he added.

Congress established the Gulf Opportunity Zone program in 2006 to help boost the economic recovery of the region in the wake of the twin disasters of Hurricanes Katrina and Rita in 2005.

The state had anticipated refunding up to $375 million of its outstanding debt in Tuesday’s competitive offering, but Kling said a rise in interest rates resulted in a lowered par amount.

Freda Johnson of Government Finance Associates, the commission’s financial adviser, said the total refunding of $298 million produced net present-value savings of $21.4 million.

Co-bond counsels are Adams and Reese LLP and Long Law Firm LLP.

Louisiana’s general obligation debt is rated AA-minus by Standard & Poor’s, AA by Fitch, and Aa2 by Moody’s ­Investors Service.

The state had $2.2 billion of outstanding GO debt before the refunding.

For reprint and licensing requests for this article, click here.
Louisiana
MORE FROM BOND BUYER