Kentucky Issuers Relaunch Two Big Municipal Transit Bond Transactions

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Taking advantage of low rates and market stability, the Kentucky Public Transportation Infrastructure Authority and the Turnpike Authority of Kentucky are planning to repay two sales of tax bonds.

The Public Transportation Infrastructure Authority will sell $ 191.81 million of 2021 series taxable fixed-rate first-level toll revenue repayment bonds for the Downtown Crossing project the week of September 13.

“Muni rates are historically low,” the state’s financial management office told The Bond Buyer, also noting the rating increases in March that raised Moody’s underlying rating of KPTIA to Baa2 of Baa3 and Fitch Ratings’ underlying BBB rating of BBB-minus.

The Abraham Lincoln Bridge, right, opened in 2015 with the help of bond financing that the Kentucky Public Transportation Infrastructure Authority plans to repay this month.

Bloomberg News

Fitch also raised his outlook to positive; Moody’s assigns a stable outlook.

“Therefore, we are able to take advantage of strong capital markets and save money for the authority,” the office said. “The savings will remain in the deed of obligation and allow certain capital projects to be completed earlier than originally planned.”

The bonds are repaid for economic purposes and are expected to reduce first level gross debt service each year through fiscal year 2053.

All of the 2021 series bonds are expected to be insured by Assured Guaranty Municipal Corp., rated A2 from Moody’s, AA from S&P Global Ratings and AA-plus from Kroll Bond Rating Agency, according to an online investor presentation for the surgery. .

The original tax-exempt bonds were issued in 2013 and have not reached their call date, which is why the transaction is defined as taxable.

But the authority is trying to exempt part of the deal from tax through a takeover bid on the outstanding bonds.

In connection with the tender, OFM stated that KPTIA proposes to purchase certain maturities of the original 2013 series optionally deposited by a bondholder for cash with the proceeds of the series 2021B bonds. Alternatively, the authority could offer to exchange Series 2013 bonds optionally deposited by qualified institutional buyers in exchange for a specified amount of Series 2012B bonds.

“In short, this has already been successfully achieved in the transport sector and we expect it to be mutually beneficial for duty bearers and authority,” said BCI.

This would add a tax-exempt 2021B Series to the mix, but the total face amount of the transaction would remain roughly the same, with the bonds deposited reducing the amount of the taxable refund.

Kentucky and Indiana have spent decades developing the cross-border mobility project between Louisville and Clark County, Indiana. The completion of the bridge and the toll, which began on December 30, 2016, was the largest public infrastructure project ever undertaken by the Commonwealth and was completed on time and on budget.

Highlights of the Louisville-Southern Indiana Ohio River Bridges project are the two new bridges crossing Ohio, the Abraham Lincoln Bridge in downtown Louisville, and the Lewis and Clark Bridge eight miles upstream from the river.

The Downtown Crossing project was a critical part of the plan and included the acquisition, financing, and construction of the Lincoln Bridge over the Ohio River from downtown Louisville to Jefferson, Indiana, as well as the reconstruction and reconfiguration of the nearby Kennedy Bridge. . He also modernized the Kennedy Interchange and reconfigured the approaches to the bridge on the Indiana side.

This is the first return of authority to the market since the project was funded in 2013, when Citigroup priced $ 728 million in 2013 Series Tier 1 Income Bonds and Notes from anticipation of subordinated income bonds for the Downtown Crossing project.

Separately in the state, the Kentucky Turnpike Authority is planning a sale of $ 156.67 million in Economic Development Roads revenue repayment bonds for various revitalization projects that are expected to be priced the week of September 6.

The deal is tentatively structured to consist of $ 13.675 million in Series 2021A Tax-Exempt Current Repayment Bonds, $ 85.825 million in Series 2021B Taxable Current Repayment Bonds and $ 57.785 million in Series 2021B Current Repayment Bonds. Series 2022A tax-exempt forward delivery.

Bonds are redeemed for economic purposes in order to save the Turnpike Authority money. The proceeds will be used to build road projects throughout the Commonwealth and is secured by a lease between the Authority and the Transport Cabinet, which is subject to appropriation.

“The Turnpike is a key issuer of high quality bonds in the state. The market has long accepted the ownership structure,” said John Hallacy, founder of John Hallacy Consulting LLC.

The bonds are payable by the Commonwealth’s Road Fund, this series of bonds being issued for economic savings.

“Muni rates are historically low and the Turnpike Authority has been out of the market since August 2017,” the OFM said. “Investors recognize the value of the strong income coverage of Turnpike Bonds. This transaction further strengthens that hedge, and we expect the bonds to be well received. “

A notable feature of the agreement is the inclusion of forward delivery obligations.

“The Commonwealth has used several structures to maximize savings (in the absence of tax-exempt prepayment obligations), including, but not limited to, taxable refunds and term delivery obligations,” according to the OFM. “Although these bonds are backed by road funds, the recent General Fund State Property and Building Commission bonds used a combination of structures to maximize savings for the Commonwealth.”

The funding plan includes a current tax-exempt bond repayment with a call in 2021, a tax-exempt term repayment of bonds with a call in July 2022, and a taxable bond repayment with a call date in 2023 , according to the Kentucky Investor Relations website.

On August 17, the Kroll Bond Rating Agency assigned a long-term rating of AA-minus with a stable outlook to Turnpike Authority bonds.

“Although subject to appropriation, this funding structure shares characteristics closer to a special tax liability,” Kroll said. “Additionally, the Commonwealth has no outstanding general obligation debt and has not issued GO debt since 1966. These authority lease bonds are how the Commonwealth finances critical road infrastructure.”

In a recent podcast, Kentucky Governor Andy Beshear told The Bond Buyer that “Kentucky’s economy is on fire right now. We are seeing more and more investments – incredible investments with jobs of the future – announced every day… We are in the perfect place to lead in the post-COVID economy. “

In 10 years, the state’s population has grown 3.8% to about 4.5 million, according to data from the 2020 U.S. Census.


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