Tennessee Closes 1st Negotiated Issue With $389 Million of GOs

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BRADENTON, Fla. - Tennessee yesterday closed on the state's first negotiated general obligation sale - a $389 million new-money and refunding deal that priced April 23.

The transaction included $291 million of Series A bonds to fund various capital improvements and refinance commercial paper and $98 million of Series B bonds to refund GO debt sold in 1996, 2002, and 2003.

State officials said the issue generated $191 million in orders from retail investors within four hours, while the overall deal locked in a true interest cost of 3.5%. The Series A bonds mature from 2010 to 2029 and the Series B bonds mature from 2009 to 2021.

"I've been in this field for 26 years and this is the lowest interest rate I've ever seen," said Mary-Margaret Collier, director of the Division of Bond Finance.

The sale was the first time the state sold long-term GO debt by negotiation, which opened opportunities for retail and in-state investors to buy the state's bonds, said state officials.

"The demand shows that retail investors understand the value of purchasing these bonds and are willing to invest in the state," state comptroller Justin Wilson said in a statement. "The low-cost financing secured by the state will provide added savings to help our state with future fiscal recovery and the stability of our state in the credit markets."

The bonds were rated AA-plus by Fitch Ratings and Standard & Poor's, and Aa1 by Moody's Investors Service.

Public Financial Management Inc. is the state's financial adviser.

Morgan Stanley was the book-runner on the GO deal. Co-managers were Loop Capital Markets LLC, Morgan Keegan & Co., Wiley Brothers-Aintree Capital, J.J.B. Hilliard, Duncan-Williams Inc., JPMorgan, Edward D. Jones, and Mesirow Financial.

Hawkins Delafield & Wood LLP was bond counsel. Waller Lansden Dortch & Davis LLP was underwriters' counsel.

In March, the Tennessee State School Bond Authority sold $109.9 million of new and refunding higher education debt in the state's first-time retail sale of revenue bonds.

The effort included the launch of a new Web site at www.buyTNbonds.com to attract retail and in-state buyers, which is available for each bond sale.

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