MassPike to Review Underwriting Proposals for Upcoming $800M Deal

The Massachusetts Turnpike Authority will review proposals for underwriting services on a $800 million refinancing bond deal that officials expect to price later this year.

Submissions are due on Aug. 25 by 3 p.m. Eastern Daylight Time and candidates can submit questions regarding the RFP no later than Aug.13. MassPike seeks an underwriter with prior experience working with transportation agencies, in particular ones that include toll facilities, and a strong knowledge of derivatives, according to the RFP.

The authority plans to refinance the $800 million of fixed-rate bonds in the fourth quarter of 2008. The debt includes Series 1997A and 1997B, along with Series 1999A. Those fixed-rate bonds are attached to five floating-to-fixed-rate swaptions with UBS Securities LLC as counterparty. Refinancing the $800 million into variable-rate mode would help the authority better match the fixed-rate debt to the swaptions.

Earlier this year, MassPike tried to refinance $126.7 million of Series 1997B bonds with Citi as senior manager. Officials scrapped those plans after the authority was unable to acquire - at appropriate cost - additional credit support beyond the existing insurance on the debt offered by Ambac Assurance Corp.

"The authority originally expected to insure any variable-rate refunding bonds issued in connection with the effectiveness of [two swaptions] with a bond insurance policy to be issued by Ambac," the RFP said. "However, the downgrading of the ratings of most municipal bond insurers, including Ambac, required that the authority seek alternative credit enhancement, which, to date, it has not been able to obtain at an acceptable price."

Lawmakers last week approved legislation to allow the commonwealth to extend its state-appropriation pledge to the $800 million of MassPike debt in order to help the authority obtain lower rates at market. That bill awaits Gov. Deval Patrick's signature.

In addition to addressing the $800 million of mismatched debt, the authority is seeking to develop a financing strategy on all of its $2.3 billion of outstanding Metropolitan Highway System debt along with potential bond transactions to help terminate existing swaps and swaptions, according to the RFP.

Public Financial Management Inc. serves as MassPike's financial adviser and bond counsel is Edwards, Angell, Palmer & Dodge LLP.

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Transportation industry
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