West Virginia is targeting retail investors, especially those who live in the Mountain State, as it sells the first tranche of the largest bond program in the state’s history.

On Monday, the state is pricing $311.8 million of general obligation bonds for retail only as part of the “Roads to Prosperity Program” proposed by Gov. Jim Justice, in which the state could issue up to $1.6 billion.

West Virginia Gov. Jim Justice
“We’re starting an exciting period of growth in our state and we should share that with the citizens,” said Gov. Jim Justice. Perry Bennet

Voters across the state overwhelmingly approved the bond program, and “we wanted to give West Virginians an opportunity to invest in the program and invest in the state," said Ann Urling, Justice’s deputy chief of staff.

“In the past this has all been done on an institutional basis but we wanted to give the citizens in the state a chance to invest first,” Justice said in a statement. “We’re starting an exciting period of growth in our state and we should share that with the citizens.”

Bond proceeds will be used for bridge and highway construction and infrastructure projects.

The tax-exempt deal is structured with minimum denominations of $5,000, serial maturities between 2018 and 2038, and term bonds in 2042 and 2043.

Bank of America Merrill Lynch is the book-runner of the syndicate. The state has selected 15 firms to participate in Monday’s retail-only issuance, Urling said.

Of 55 counties in West Virginia, voters in 54 counties favored the GO program; the October measure passed with 73% of the vote.

The state placed advertisements in various newspapers and launched an investor relations website to notify local investors about the deal.

On Wednesday, West Virginia plans to competitively sell $488.2 million of GOs as the second tranche of the road and infrastructure program.

Both deals are rated AA by Fitch Ratings, Aa2 by Moody's Investors Service, and AA-minus by S&P Global Ratings.

Moody’s and S&P said the outlook is stable, while Fitch revised its outlook to stable from negative.

The stable outlook, Fitch said, incorporates recent stability in key revenue sources and the state’s modestly stabilizing economic indicators, as well as proactive management of financial operations and improved expense controls for its Medicaid program.

“Fitch believes active management of operations will be vital to maintaining credit quality given the structural decline of coal production and its direct effect on key revenue sources,” said analyst Marcy Block. “The AA ratings are supported by the still sizable level of reserves at the state's disposal, which provides financial cushion as the state strives for budgetary equilibrium with its evolving economy.”

State lawmakers have authorized the remaining debt in the road and infrastructure program to be sold as $200 million in 2019 and $200 million in 2020.

Public Resources Advisory Group is the financial advisor.

Jackson Kelly PLLC is bond counsel, Steptoe & Johnson PLLC is underwriters’ counsel, and Spilman Thomas & Battle PLLC is disclosure counsel.

Along with BAML on Monday’s sale, other firms are Citi, Crews & Associates, Morgan Stanley & Co., Piper Jaffrey & Co., Raymond James & Associates, Wells Fargo Securities, Fifth Third Securities Inc., The Huntington Investment Co., J.P. Morgan, Janney Montgomery Scott LLC, KeyBanc Capital Markets Inc., Ramirez & Co., RBC Capital Markets, and UBS Financial Services Inc.

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