The state of Louisiana is in the market this week with a municipal bond deal backed by unclaimed property, after a long battle between state officials over how the revenue should be used was settled last year.
TD Securities (USA) LLC is pricing the state’s $135.92 million of Series 2021 taxable unclaimed property special revenue refunding bonds.
“Over the prior few weeks, the state has taken advantage of the attractive current market environment by utilizing taxable advance refundings to refinance its outstanding tax-exempt bonds,” said Jon Biango, director at TD Securities. “The Unclaimed Property Special Revenue credit is next in line. This credit is unique in that it combines an established revenue base and ample debt service coverage with a State of Louisiana appropriation backing.”
The financial advisor is Lamont Financial Service Corp. The bond counsel is Jones Walker LLP and the underwriter’s counsel is Foley & Judell LLP.
The sale comes after a
Bucking prior practice, the treasurer didn’t transfer some of the unclaimed property revenue for fiscal 2019 and 2020 to the general fund, saying that it should be kept separate until the rightful owners came forward. Edwards sued the treasurer and the court ruled in favor of the governor.
After
The Series 2021 bonds are backed by abandoned and unclaimed property receipts placed in the Unclaimed Property Leverage Fund and by the state’s pledge to appropriate funds to replenish the debt service account if not enough receipts are deposited.
The deal consists of $71.14 million to refund debt for the Interstate 49 South project and $64.78 million for the I-49 North project. It's tentatively structured as serials ranging from 2021 to 2033 for the I-49 North Series 2 bonds and from 2021 to 2035 for the I-49 South Series 1 bonds.
Proceeds will advance refund some or possibly all of the state’s callable special unclaimed property revenue bonds, which consist of the Series 2013 bonds for the I-49 South project, the Series 2013 bonds for the I-49 North project and the Series 2015 bonds for the I-49 South project.
Since 2011, Louisiana has sold about $9.5 billion of bonds, with the most issuance occurring in 2012 when it offered $1.8 billion; the state was not in the market in 2018.
Coincidentally, Monday was “National Unclaimed Property Day.”
According to Treasurer Schroder, more than $900 million in payroll checks, bank accounts, royalties, refunds, deposits, gift certificates and life insurance is waiting to be claimed by state residents.
“As quickly as we return lost money, we get even more in,” Schroder said in urging people to check the
The preliminary official statement contains disclaimers that the pledged unclaimed property revenue revenue may not be sufficient to meet debt service payments.
The state treasurer and his unclaimed property division continually undertake efforts to reunite owners with abandoned and unclaimed property, the POS said. "In addition, technological advances may enhance the ability of the holder of the property to locate the owner of such property, which may result in a decrease in the payment or transfer of such property to the State Treasurer."
That's why the state's appropriation pledge is key to the credit and its ratings, which were affirmed ahead of the deal at A1 with a stable outlook by Moody’s Investors Service and A-plus with stable outlook by S&P Global Ratings.
In both cases, the rating is notched one below Louisiana's general obligation bond rating.
The rating reflects “the moderate strength of the security for the bonds, including the need for appropriation by the state legislature and the mechanics of debt service reserve replenishment, and the high essentiality of the highway projects supported by the bonds,” Moody’s said.
While Louisiana has been hit hard by the coronavirus, Moody’s said that “cautious budgeting combined with federal aid have helped to preserve the state's liquidity.”
The rating agency said its stable outlook reflects the Louisiana’s powers to balance its budget in response to economic shocks, including the negative fiscal effects of the pandemic.
According to the state’s website, Louisiana has 2,580 new cases of COVID-19 as of Feb. 1 with 41 new deaths reported, bringing hospitalizations to 1,440 patients. Coronavirus cases now stand at 404,194 with 8,953 total deaths.
Louisiana is not the only issuer in the Pelican State in the market this week.
The city of New Orleans is offering $377 million of taxable refunding bonds.
JPMorgan Securities is set to price the deal, which consists of $191.59 million of taxable water revenue refunding bonds and $185.065 million of taxable sewerage service revenue refunding bonds.
The deal is insured by Assured Guaranty Municipal Corp., with an insured rating of AA from S&P Global Ratings; it carries underlying ratings of A from S&P and BBB-plus from Fitch Ratings.
"Given the strength of our balance sheet, our underwriting capabilities, our broad market acceptance and the trading benefit our insured bonds can bring, Assured Guaranty is uniquely positioned to help lower the borrowing cost for the city,” said Jim Binette, managing director for Eastern region public finance at Assured.
The bonds are backed by a pledge of net revenues from the water system.
Proceeds will refund some or all of the Series 2014 water revenue and refunding bonds, the Series 2015 water revenue bonds, the Series 2014 sewerage service revenue and refunding bonds and the Series 2015 sewerage service revenue bonds.
Co-managers on the deal are BofA Securities, Loop Capital Markets, Ramirez & Co., Raymond James and Wells Fargo Securities.
PFM and CLB Porter are the financial advisors; Foley & Judell and Auzenne & Associates are the bond counsel.
Last November, the city sold $65 million of Series 2020B tax-exempt sewerage service revenue bonds. The deal was partly insured by Assured.
Since 2011, New Orleans has sold about $1.3 billion of bonds, with the most issuance occurring in 2012 when they offered $364 million; the city was not in the market in 2017 or 2018.
As of Feb. 1, New Orleans has a seven-day average of 127 new cases of COVID-19, a weighted 14-day average infection rate of 0.94%, a weekly positive test rate of 4.0%, with 67.5% of hospital beds in use for coronavirus patients.
