DALLAS — The Louisiana State Bond Commission approved expanded parameters for a planned refunding of gas and fuels-tax bonds to a maximum of $850 million from the $400 million approved two weeks ago.
The expansion got the nod from the panel at a brief special session Thursday morning.
Commission director Whit Kling Jr. said the refunding will involve outstanding debt from revenue bonds issued in 2002, 2005 and 2006. The fuels tax bonds helped finance the Department of Transportation and Development’s highway construction and maintenance efforts.
Kling was given the authority to determine when the refundings will occur and which bonds will be refunded, in consultation with financial advisor Lamont Financial Services, bond counsel Foley & Judell LLP and state officials.
His authority to decide on the timing of the refunding will last through Oct. 25.
The $850 million refunding is the upper limit of what might be possible, according to Kling.
“We have been running a number of scenarios at various levels, in anticipation of a spread of some 30 basis points,” he said. “We’ve been looking at whether it would be better to refund now or wait, and it looks like it is better now.”
Meredith Hathorn of Foley & Judell said the shift gives Louisiana additional flexibility and the ability to accommodate market changes.
“This will let us take $200 million to the market if the market is right, and then come back within these six months and do other refundings,” she said.
“These things can come up quickly and we want to be able to move quickly,” Hathorn added. “This will give the state additional flexibility in the market.”
She said a potential refunding must show debt service savings in every year, as mandated by commission rules.
The refunding parameters adopted by the Bond Commission Thursday include no more than 6.5% interest on fixed-rate debt and 12% on variable-rate debt. The term can be no longer than May 1, 2041.
“It is very unlikely that the state will issue variable-rate debt,” Hathorn said.
Citi was named senior managing underwriter on refunding by the commission on March 15. Co-managers include Jefferies & Co., Morgan Keegan & Co., Loop Capital Markets LLC, Stephens Inc. and Dorsey & Co.
Louisiana officials hope to go to market with the initial refunding in early May, Hathorn said.