DALLAS - After a record year of bond issuance, the Texas Department of Transportation has reduced its borrowing costs by $425 million through refunding at historically low interest rates, officials said.
The most recent sale of $1.83 million of fixed and variable-rate bonds on Dec. 3 achieved present value savings of $116 million, representing 11.43% of the refunded bonds' par amount, according to Benjamin Asher, officer of Innovative Financing and Debt Management for TxDOT.
The refunding, originally expected to be about $1.4 billion, grew as the interest-rate environment continued trending in TxDOT's favor, Asher said.
"Despite the heavy new issue calendar (roughly twice the volume for an average week in 2014) the market was stable, which facilitated a very smooth and well-received transaction," Asher said via email. "There was substantial investor demand, we believe attributable to our highly rated Texas GO credit."
The TIC of the $1.58 billion of fixed-rate bonds came out to 3.55%, Asher said. Another $250 million of variable rate bonds bear interest at a fixed spread of 38 basis points to SIFMA for four years.
"With SIFMA running at all-time lows (currently 0.04%) we believe this strategy will provide a very low cost of financing for mobility projects in Texas," Asher said.
Although debt issues are managed by TxDOT, they carry the name of the Texas Transportation Commission, a board of appointed members that authorizes financing and construction projects.
After issuing more than $4.4 billion of bonds in 2014, the TTC ranks as the nation's second-largest issuer behind the state of California.
