BRADENTON, Fla. - The West Virginia School Building Authority today begins a two-day, $100 million bond offering that will launch a new, long-term financing program to assist the state's public schools with capital improvements.

The fixed-rate debt, with a final maturity in 2028, is being secured with excess lottery revenue derived from the profits of racetrack and limited video lottery games as well as some related fees. The bonds also will have a back-up pledge from West Virginia's traditional lottery revenues, which are derived from instant and online games.

The Series 2008 bonds will not be insured because the authority's finance team has determined that it is not cost effective, officials said. The deal is structured to have level debt service.

While the issue itself is plain vanilla, it is the core of a unique school capital funding program created with future issuances in mind that was fostered by Gov. Joe Manchin3d to provide a source of long-term financing, bring stabilization to the local construction market, and lower construction costs incurred by the state.

"What it does for us is it takes the boom and bust feature away from our school construction program," said Joe Martin, deputy chief of staff for the governor. "It allows us to achieve what we believe will be the best bids on projects since it will not be a feast or famine situation like what happens when you issue a lot of debt all at once. You'll always find contractors to fill the void but they often charge a premium price."

Martin said underwriters believe the offering will be well received. It is expected to be sold to retail investors today and institutional investors tomorrow.

The bonds are rated A, A2, and AAA by Fitch Ratings, Moody's Investors Service, and Standard & Poor's, respectively.

The bonds will have very high debt service coverage, more than seven times, and are supported by revenues that have shown good performance even through weak economic cycles, said Standard & Poor's analyst John Sugden-Castillo.

West Virginia's lottery revenue bonds were upgraded to AAA by Standard & Poor's in late 2006, along with lottery revenue bonds in Oregon and Florida largely because of good economic performance and good management of the lottery programs.

Merrill Lynch & Co. and Raymond James & Associates Inc. are underwriting the deal. Public Resources Advisory Group is the authority's financial adviser, Spilman Thomas & Battle PLLC is bond counsel, and Lewis Glasser Casey & Rollins PLLC is underwriters' counsel.

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.