CHICAGO — The Ohio Turnpike Commission plans to come to market the week of July 29 with $1.1 billion of turnpike bonds backed by a new credit pledge that is key to the state's future transportation funding plans.
The bulk of the deal, nearly $983 million, will consist of junior-lien bonds that are subordinate to outstanding senior-lien turnpike debt. The borrowing will also include $71 million of new senior-lien debt.
The junior lien trust agreement allows the commission to issue bonds against future toll revenue projections. Currently it is restricted to issuing bonds with coverage levels tied to historic revenues.
Proceeds from the subordinate lien debt will be used to finance transportation infrastructure projects that have a nexus with the 241-mile Ohio Turnpike.
The new credit is part of Gov. John Kasich's effort to leverage the turnpike to raise money for projects across the state. Kasich had considered privatizing the double-A rated turnpike, which is one of the highest-rated toll roads in the U.S. But he later proposed that the turnpike commission craft a new credit pledge that allow it to borrow up to $1.5 billion of new debt for infrastructure projects across the state. Some of the proceeds could also be used to tap another $1.5 billion of federal dollars, Kasich said.
Previously, proceeds from turnpike revenue bonds could only be used for turnpike projects.
The state is expected to return to market in 2018 with another $500 million of the junior-lien bonds.
The commission approved the bond sale at its Monday morning meeting.
Citi is the book-running senior manager on the deal. JPMorgan Chase & Co. and Morgan Stanley are co-seniors. Co-managers are: Bank of America Merrill Lynch; Fidelity Capital Markets; Huntington Investment Co.; Jefferies & Co.; KeyBanc Capital Markets Inc.; Loop Capital Markets Inc.; PNC Capital Markets LLC; RBC Capital Markets; Rice Financial Products LLC; Stifel, Nicolaus & Company Inc.; and Wells Fargo Securities LLC.
Squire, Sanders is bond counsel and Public Financial Management Inc. is financial advisor.
Moody's Investors Service has assigned an initial A1 rating to the junior-lien bonds and Aa3 rating to the senior lien bonds. It also affirmed the Aa3 rating on $540 million of outstanding senior-lien revenue bonds.