Louisiana Postpones $500 Million GO Sale, Maybe Until Next Summer

DALLAS - Louisiana will delay a planned sale of $500 million of state general obligation bonds until after the first of the year due to turmoil in the credit markets.

The bonds, which will finance construction projects on the legislative capital outlay list, were approved by the State Bond Commission in July. The commission authorized up to $1.2 billion of GO bonds, but officials said they intended to issue only about $500 million of the debt in a sale tentatively set for late 2008.

However, state Treasurer John N. Kennedy said Wednesday that the bonds will not be sold before January, and may not be issued until next summer.

"We planned to go forward this fall, but the markets are unsettled, and that is an understatement," said Kennedy, who chairs the Bond Commission. "We don't have to do it right now, and the governor agrees with that, so we're not going to."

The bond proceeds would replenish the escrow account that Louisiana uses to pay for capital outlay projects. Kennedy noted that there is more than $200 million remaining in the escrow account, which he said is sufficient to meet construction expenses for several months.

"We can control the tempo of those projects to avoid having to draw down that escrow account," he said. "We might slow some of them down, we might speed some up, and some might go sideways. Some of them we might have to juggle."

Louisiana last issued GO debt for capital outlay purposes in September 2006. The state has not needed the bond proceeds since then due to the federal disaster funds and insurance payments it received following the hurricanes of 2005.

In addition to the planned $500 million GO sale in fiscal 2009, officials expect to issue $400 million of capital outlay bonds in fiscal 2010 and a similar amount in fiscal 2011.

The state's GO bonds are rated A1 by Moody's Investors Service, and A-plus by Standard & Poor's and Fitch Ratings.

Kennedy said he and other state officials will monitor the credit situation, but they are in no hurry to bring the scheduled debt to market.

"If we sold those bonds in this market, we'd pay a premium on the interest that we would not have to pay," he said. "We're going to wait. We'll continue to watch the market, but the escrow account should be sufficient to take us well into next year."

A planned sale by the Louisiana Local Government Environmental Facilities and Community Development Authority of $45 million of revenue bonds set for early October has been delayed as well, but officials said they hope to issue the debt next week. Proceeds will finance construction of a new campus in Monroe for Louisiana Delta Community College.

The new campus is set to open for the fall semester in 2010. The bonds are rated A by Standard & Poor's and A3 by Moody's Investors Service.

Earlier this month, the Louisiana Community Development Authority delayed the negotiated $180.1 million sale of lease revenue bonds for the Louisiana Community and Technical College System.

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 financial markets.

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