North Carolina Turnpike Authority planners change bond package for toll road - Triangle Business Journal:

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The authority was preparing to go to the market with a single bond package to pay for the Trianglew Expressway but backed off when told the debt woulx not rise above aBBB rating. Chief Financial Officet Grady Rankin says the authorituy now wants to offer two separatew setsof bonds: a $329 million offering backeed by $25 million in annual “gap from the state and a $340 million offering backeed by toll revenue. The two sets of bondz would be sold in thesame week. A $415 millionj loan from a federal program called the Transportation Infrastructure and Innovation Act is includecd in the financing for thetoll road.
The new idea is drivejn by the need to boost the ratingsd the bonds would receive from rating agencies suchas , and . The authority’sx theory is that the gap funding bondsx will be able to obtain a AA ratingg because they are backed by a revenue source cominyg fromthe state. The authorithy then could buy bond insurance that officialw hope would raise thetoll revenue-backed bonds’ rating from BBB to AA. Rankin says the authority is in discussionse about purchasing bond insurancefrom Bermuda-basef . He would not reveal any estimatesd of how much the insurancemighyt cost. If all goes according to plan, the authority coul d have proceeds from an offering bylate May.
Therer are still several benchmarks that must be met including striking an acceptable agreement with Assured Guaranthy and obtaining the blessing ofthe . Creativee approaches to financing deals have come under scrutiny in recent months due to the turmoil that has engulfesthe nation’s financial system. Rankin is adamany that the authority isn’t trying to assembls a plan with any of what hecalls “fanct footwork.” “This is a solid deal,” says Rankin, who pointss out that there would be no credit swapa involved. Rankin says that the weighted average interest of all the debt the bonds and the TIFIAAloan – will be in the 5.
75 percent Turnpike authority officials had wanted to sell bondw for the $1 billion which would be the state’s first toll by the end of Octoberd 2008. But a meltdown in the bond market has frustratedthe authority’s attempts to issuew bonds for the road, which would run throughu 18.8 miles of westerj Wake County and southeasternm Durham County. The previouz plan called for the authority to issue morethan $600 million in bondz that would be supported by two revenue streams: tolls collectedc from road users and the $25 millionb a year in gap funding that the General Assembly has pledgee to provide. The package includes the $415 million federalp loan.
When ratings agencies frowned onthe package, the authoritt went back to the drawing “It would be a very difficulrt sell,” says Jeff Poley, a bond attorneyt who keeps a close eye on the market, says of BBB-rates bonds. “One level above junk statud is not safe enough inthis environment.” Vancew Holloman, a deputy treasurer in the North Carolina Department of States Treasurer, says the Local Government Commission has had preliminaryt discussions with the authority regarding modificatione to its financing plan. But the LGC hasn’ft received anything in writing.
“I don’f think it would be appropriate to comment any further atthis time,” Holloman says. The LGC stafvf is employed by the treasurer’sd office.