DALLAS — The Louisiana State Bond Commission on Thursday approved the negotiated sale of up to $350 million of state highway improvement bonds to repair and maintain state roads in rural parishes.
The 20-year, fixed-rated bonds are expected to be issued in the second week of January.
Support for the bonds will come from 50% of the annual revenue from fees and taxes on commercial trucks and trailers deposited into the State Highway Improvement Fund.
Revenues supporting the road bonds are estimated at $51.8 million in fiscal 2013, growing to $58.5 million in fiscal 2016.
Citi is lead manager the bonds. Co-managers will be Loop Capital Markets, Morgan Stanley, Raymond James | Morgan Keegan, and Stephens Inc.
Foley & Judell LLP is bond counsel. Lamont Financial Services is the state's financial advisor on the sale.
Louisiana has $1.86 billion of outstanding gasoline and fuels tax revenue bonds rated AA-minus by Fitch and Aa1 by Moody's Investors Service.
The bonds were authorized by a bill sponsored by Rep. Jim Fannin, D-Jonesboro, chairman of the House Appropriations Committee and a member of the State Bond Commission.
January's bond sale will culminate a long process of finding a funding source for rural roads and then shepherding the bill through a Legislature wary of new state debt, Fannin said.
"It's certainly something that was needed and an important issue for the state," Fannin said.
"I appreciate everyone working together in a timely manner to get this done."
The deal may be structured in a draw-down mode that would allow the bonds to be sold while interest rates are low but still meet the highway department's construction schedule, State Treasurer John Kennedy said.
"What I don't want to do is spend several years building these roads without locking in low interest rates," Kennedy said.
The Louisiana Department of Transportation and Development had originally considered three sales to complete the authorization.
Bond proceeds will finance resurfacing and upgrades to 1,100 miles of highway in every parish except Orleans Parish. The enabling legislation stipulated that the bond proceeds can be used only on state highways that are not eligible for federal matching grants.
The commission met in executive session for a briefing on litigation over a 2006 bond issue by the Louisiana Stadium and Exposition District. The state is currently in litigation over the Superdome issue with Bank of America Merrill Lynch, which was the lead underwriter for the issue when it was operating as Merrill Lynch Capital Services Inc.
The state bought the outstanding variable-rates bonds in 2008 when the auctions failed, and must refund the bonds by the end of the year or keep them until maturity.
Bond counsel Meredith Hathorn of Foley & Judell said the district board had approved a memorandum of understanding that would be submitted to the Bond Commission at the Dec. 20 meeting.
St. Tammany Parish Hospital Service District No. 1 won approval for $25 million of 35-year revenue bonds to renovate and equip a hospital in Covington.