BRADENTON, Fla. – Tennessee officials hope a lack of available state paper boosts demand for its upcoming $402 million new money and refunding deal.

The Tennessee State School Bond Authority will price the negotiated deal Tuesday, with Citi as the book-runner and senior underwriter. The TSSBA is a state agency.

Bond proceeds will finance the state’s pool loan program that provides capital and refunding savings for universities and colleges across the state.

Tennessee Finance Director Sandi Thompson said underwriters believe a shortage of state paper will help create demand for Tuesday’s deal.
Tennessee Finance Director Sandi Thompson said underwriters believe a shortage of state paper will help create demand for Tuesday’s deal.

The TSSBA bonds are rated Aa1 by Moody's Investors Service, and AA-plus by Fitch Ratings and S&P Global Ratings. All have stable outlooks.

Sandi Thompson, director of the Office of State and Local Finance, said the last time the School Bond Authority was in the market was two years ago, while triple-A rated Tennessee sold bonds more than a year ago.

“The underwriters said they have gotten really good feedback in that they hadn’t seen Tennessee paper issued in a while,” Thompson said.

Couple that with the overall low volume of debt being issued, the underwriters “think there will be quite a bit of demand,” she said.

“So it really puts us in a good position and we really anticipate that this will be a good bond sale for us,” Thompson said.

Tuesday’s deal is structured in three parts.

The largest amount being sold - $246 million of tax-exempt, new money bonds, Series A – will reimburse money spent on completed projects and will provide partial financing for projects that are underway such as dormitories, parking facilities, a football practice facility, and a student center.

The A bonds will have serial maturities between 2018 and 2037, and two term bonds of $51.9 million due 2042 and $42 million due 2047. Maturities on or after Nov. 1, 2028 are subject to optional redemption.

The deal includes two refundings with no extension of maturities, for which the state requires a minimum of 4% net present value savings, according to Thompson.

As of Friday, the estimated net present value savings for the $140.6 million of tax exempt refunding bonds, Series B, was $19.1 million or 11.14% of the refunded bonds. The B bonds will have serial and term maturities between 2017 and 2042.

On $15.15 million of taxable refunding bonds, Series C, the savings was estimated to be $951,536 or 6.41% of refunded bonds. They will have serial and term maturities between 2017 and 2047.

Thompson said the state probably won’t be back in the market until next year with a new and refunding deal.

PFM Financial Advisors LLC is advising the School Bond Authority. FTN Financial Capital Markets, Wells Fargo Securities, and Morgan Stanley also underwriting Tuesday’s deal.

Hawkins Delafield & Wood LLP is bond counsel. Bass Berry & Sims PLC is counsel to the underwriters.

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