BRADENTON, Fla. - Tennessee plans to price $460 million of new and refunding higher education facilities bonds by negotiation on Wednesday.
The bonds are being offered by the Tennessee State School Bond Authority, which will use proceeds to finance 17 projects at various universities and to refund all or portions of 2007C, 2008A and B, 2009A, and 2010A bonds for interest savings.
The authority's financial advisor, Public Financial Management Inc., has estimated the present value savings of the refundings at $13.7 million or 7.849% of refunded par, according to Sandra Thompson, director of the Office of State and Local Finance.
The deal is structured as $75.6 million of Series A taxable bonds and $383.6 million of Series B tax exempt bonds. Both series are expected to be issued as fixed-rate debt with serial and term bonds that have final maturities in 2045.
The bonds are secured by a pledge of revenues from public colleges and universities, and payable through a second program financing agreement with Tennessee Board of Regents and the University of Tennessee systems.
"This is clearly a good time to go to market for either [a refunding or new money issuance]," Thompson said. "We are pleased to pass along that value in terms of reduced debt service on a refinancing of existing debt and reduced cost on additional borrowings to the students and parents of students of UT and TBR systems, and the state's taxpayers as well."
The bonds are rated AA-plus by Fitch Ratings, Aa1 by Moody's Investors Service, and AA by Standard & Poor's. All have stable outlooks.
Analysts said the transaction benefits from a strong state intercept program that can capture state appropriations for public higher education institutions to pay debt service, if necessary.
"The state of Tennessee has a strong and demonstrated history of providing sufficient revenues that would be available in a timely manner to meet debt service coverage in a stress scenario," said Moody's analyst Mary Kay Cooney. "Although the state does have a recent history of fluctuating state aid, we expect interceptable revenue to remain sufficient to cover debt service given the state has a long-standing overall commitment to funding higher education."
Citi is the book-runner of the syndicate, which includes JPMorgan, Wells Fargo Securities, and SunTrust Robinson Humphrey.
Hawkins Delafield & Wood LLP is bond counsel. Bass Berry & Sims PLC is counsel to the underwriters.
