November 5, 2009

Sale of Transportation Bonds Nets Savings of $21.9 million

Another major State banding program was met with good news last week in the form of an exceptionally strong sale of $550 million worth of bonds for the State’s transportation program—the largest sale of new money bonds in the program’s history, and the first time that the State has ever issued Build America Bonds (BABs) made available under the America Recovery and Reinvestment Act (ARRA). The net savings realized from the sale is roughly $21.9 million over the life of the bonds. “All told, since 1999 my office has saved $617 million in debt service over the life of the bonds due to an active debt refunding and defeasance program,” said Treasurer Nappier. “Every dollar of debt savings is one less dollar that our taxpayers must contribute,” noted Nappier.

Of the bonds offered for sale, $500 million of bonds were sold to fund ongoing transportation improvements across the State (such as highways and bridges, mass transportation and transit facilities and other transportation improvements). The remaining $50 million of bonds were sold to refund existing bonds in order to lower interest rates and achieve savings. The transaction included a combination of traditional tax-exempt bonds ($246 million) and taxable BABs ($304 million), a new type of taxable bonds designed to lower interest costs for municipal issuers and which are eligible for a 35% interest subsidy from the federal government under ARRA.

The overall interest cost on the $500 million of 20-year new money bonds was 3.48% (including the federal subsidy)—the lowest overall interest cost on any new money bonds in history issued for the transportation bonding program. Even without the federal subsidy, this bond offering is record-setting as the most favorable interest cost in State history.

The sale attracted significant interest from a variety of investors for both the taxable and the tax-exempt bonds. “We stuck to our strategy by first allowing individual investors to place orders for these bonds, and it paid off with more than $132 million of retail orders for the tax-exempt bonds. On top of that, demand from institutional investors for the taxable portion of the sale exceeded the amount of bonds available by nearly two times,” said Nappier. “The tremendous success of the overall sale demonstrates investor confidence in Connecticut, and that its bonds are an attractive option for different types of investors,” she stated.

The State Treasurer’s Office commended the work of Siebert Brandford Shank, the senior manager of the bond sale; Updike, Kelly and Spellacy, bond counsel; Lewis & Munday, co-bond counsel; and Public Resource Advisory Group and AC Advisory, financial advisors on the transaction. The Special Tax Obligation bonds received ratings of A1, AA, and AA- with stable outlooks form Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings. The bond sale is scheduled to close on November 10.

Quoted directly from press release issued by

The Office of Connecticut State Treasurer, Denise L. Nappier

November 5, 2009