BRADENTON, Fla. — Tennessee next week is selling $584.27 million of tax-exempt and taxable general obligation bonds in the state’s largest ever single sale.

Bond proceeds will finance capital and economic development projects, refinance commercial paper, and refund outstanding debt.

The transaction is structured as $255.48 million of tax-exempt Series A new-money bonds, $105.57 million of Series B refunding bonds, and $223.22 million of taxable Series C bonds.

The A and C bonds mature in 2031, while the final maturity for the Series B refunding bonds is 2025.

The size of the deal’s taxable piece is unusual for the state, which is advance funding several large economic development projects because interest rates are so low, according to Mary-Margaret Collier, director of the state’s Division of Bond Finance.

“We want to lock in low rates,” she said.

JPMorgan will lead a syndicate pricing the taxable bonds Tuesday and Wednesday.

The tax-exempt bonds will price Wednesday and Thursday with Citi as book-runner.

The Series B bonds as well as a portion of the taxable C bonds will refund outstanding debt for savings within the refunded maturities. The state’s threshold for a refunding is 4%.

The present-value savings on the tax-exempt refunding bonds is expected to be $8.04 million, or 6.89%. The taxable refunding’s present-value savings is estimated to be $2.3 million, or 12.37%.

While Tennessee often issues competitively, Collier said next week’s offering is complex and selling by negotiation provides a better opportunity to make bonds available to retail investors and new customers.

“The syndicate for the tax exempt bonds is focusing on retail,” she added.

The retail effort includes a website at with details about the sale and information about how to buy the bonds.

“I think this is a great opportunity for investors to find whatever characteristic in a bond that they may choose to find — tax-exempt, taxable, short and long term,” said Lisa Daniel, a managing director for Public Financial Management Inc., the state’s financial advisor.

Since Tennessee is an infrequent issuer and not much of the state’s paper is outstanding, Collier said she expects good demand from investors.

The bonds are rated triple-A by Fitch Ratings and Moody’s Investors Service, and AA-plus by Standard & Poor’s.

Fitch placed a stable outlook on the state’s debt, while S&P maintains a positive outlook.

Moody’s outlook is negative and relates to the agency’s Aug. 2 decision to confirm the Aaa rating of the United States and assign a negative outlook, according to analyst Julius Vizner.

“We believe that Tennessee’s rating could be affected by a downgrade of the U.S. government’s rating,” Vizner said.

“In the coming weeks, we will assess Tennessee’s degree of vulnerability to sovereign risk in terms of its reliance on capital markets, dependence on federal revenues, sensitivity to macroeconomic cycles, and available financial resources to offset risks related to the U.S. government, in order to determine whether to maintain the negative outlook,” he said.

The negative outlook is not expected to affect pricing, according to Collier, who noted that rating agencies were informed Tennessee has contingencies if federal funds are reduced or eliminated.

If federal funds are cut in specific areas, the state will reduce or cut those programs. If the funds are reduced by a certain amount or percentage, state agencies that receive those funds have been asked to prepare for budget reductions between 15% and 30%.

“I think we have all of the contingency plans in place,” Collier said.

The state has $1.653 billion of outstanding GO bonds. About $1.63 billion of authorized but unissued GO bonds will remain after next week’s offering.

Other underwriters on the tax-exempt Series A and B bond sales are Barclays Capital, Morgan Keegan & Co., Morgan Stanley, SunTrust Robinson Humphrey Inc., Wells Fargo Securities and Wiley Bros. Aintree Capital LLC.

A selling group for the tax-exempt bonds consists of Duncan Williams Inc., Edward Jones, FTN Financial Capital Markets, Harvestons Securities Inc., J.J.B. Hilliard, W.L. Lyons LLC, and Robert W. Baird & Co.

Other underwriters on the taxable bond sale are Goldman, Sachs & Co., Bank of America Merrill Lynch, Siebert Brandford Shank & Co. and Stephens Inc.

Bond counsel is Hawkins Delafield & Wood LLP. Underwriters’ counsel is Bass, Berry & Sims PLC.

Tennessee last sold GO bonds a year ago in a competitive offering that consisted of $169.5 million of new-money tax-exempt bonds and $43.76 million of refunding bonds.

The new-money bonds priced to yield 1.15% in 2015, 2.99% in 2023, and 3.640% in 2031.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.