DALLAS - The negotiated sale of $180.1 million of lease revenue bonds by the Louisiana Local Government Environmental Facilities and Community Development Authority for the benefit of the state's community college and technical school system will be delayed due to market turmoil.
The debt had tentatively been set to sell this week, but John Mayeaux of Sisung Securities Corp., financial adviser to the college system, said the bonds would not be issued until relative calm returns to the credit markets.
"We're day to day," Mayeaux said. "Hopefully, the bailout approved last week by Congress will bring a calming effect to the market. We hear that some folks are going to test the waters this week. We'll wait to see how that plays out."
Up to $200 million of the revenue bonds were authorized by the Legislature in 2007, with the proceeds dedicated to projects by the Louisiana Community and Technical College System. The bonds will be supported by legislative appropriations to the system for the rental payments.
The community college system established the Louisiana Community and Technical College System Facility Corp. to build the bond-financed projects and lease the buildings to the state system.
Morgan Keegan & Co. is lead underwriter on the issue. Other members of the underwriting team include Crews & Associates Inc., Coastal Securities, Stephens Inc., and Doley Securities.
Jackson, Walker, Waechter, Poitevent, Carrere & Denegre LLP is bond counsel for the college system.
The bonds are rated A3 by Moody's Investors Service and A by Standard & Poor's.
There will be no insurance or other enhancement for the bonds, Mayeaux said.
"We're going to market based on the underlying ratings," he said. "We looked at insurance, but with all the downgrades of the insurers it just wasn't feasible. We talked with Berkshire Hathaway, but they were not interested in appropriation-backed bonds."
The lack of enhancement should not be a problem when the bonds are sold, according to Mayeaux.
"These types of bonds have been well received in the past," he said. "We think the market will recognize this as a good credit. Things will happen once we get a little more stability into the market."
The bonds were expected to be sold earlier this year following approval by the State Bond Commission in December, but several factors led to a delay, Mayeaux said.
Lawmakers pledged to appropriate at least $15.8 million a year for up to 30 years for debt service on the bonds when the enabling legislation was passed, but Gov. Bobby Jindal, who was inaugurated in January, insisted on a 20-year term for the bonds.
"The shorter term changed the expected annual debt service, so that had to be resolved," Mayeaux said. "We had to work with the new administration to prepare the final documents, and negotiate the cooperative agreements, all of which took some time. We were about ready to sell, just as the credit market hits a crescendo of uncertainty."
Jan Jackson, senior vice president for finance and administration at the community college system, said new facilities are needed to accommodate an influx of students.
Initial enrollment figures for the fall 2008 semester show a 13.6% increase from last spring, to more than 59,500 students, she said.
"With this type of enrollment growth, you need a place to put all the students," Jackson said. "We will use the bond proceeds to renovate some existing buildings, but we also will be building several new campuses."
The bill authorizing the bonds was co-sponsored by 23 state senators and 83 representatives. Proceeds will finance 23 capital projects at the system's 14 institutions, which include 13 local community colleges and Louisiana Technical College, which operates 38 campuses across the state.