State Sells $400 Million in Bonds to Aid Hurricane-Impacted Local Governments

         Kennedy Says Proceeds Will Help Local Leaders Pay Debt to Free Up Funds for Recovery

BATON ROUGE, LA – The State Bond Commission today approved the sale of $400 million in bonds to help hurricane-impacted political entities in Orleans Parish make debt service payments and avoid possible defaults, according to State Treasurer John Kennedy.

“We had a terrific bond sale, and it really bodes well for future state deals,” said Treasurer Kennedy. “We had more buyers than we did bonds, so much so that we literally had to turn buyers away. We didn’t know what to expect because of the uncertainty from the storms, but the capital markets were obviously impressed with the way the state has handled itself in the wake of the recent catastrophes.”

The actual bond sales, which occurred earlier this week, were Louisiana’s first entry into the market since Katrina and Rita hit the state. Buck Landry of Morgan Keegan, the underwriting firm which handled the sale for the state, told the Bond Commission “the state’s re-entry into the market place was an overwhelming success.”

Pursuant to the Gulf Opportunity Zone Act of 2005, the state sold $200 million in Gulf Tax Credit Bonds and $200 million in general obligation match bonds. The proceeds from the sale will benefit 13 Orleans area political agencies that qualified for debt service assistance, and the funds can only be used for debt service relief.

The Gulf Tax Credit Bonds were an innovative financing tool for the state. The state pays the principal on the bonds, the local government entities pay the state back over time, and the federal government provides bond purchasers with federal income tax credits in lieu of paying them interest. It was the first time any state had sold such a large principal amount of bonds carrying a federal tax credit.

Deputy Commissioner of Administration Jean Vandal, sitting in at today’s meeting for Commissioner Jerry Luke Leblanc, commented, “We are pleased, the results of today’s meeting means that the thirteen agencies which provide vital services in Orleans Parish will remain financially stable through this recovery process.” Many of the agencies which will receive assistance as a result of the bond sale are facing debt payments next month. One agency, the Orleans Parish Sewer and Water Board, has a debt payment due late next week.

Morgan Keegan led the underwriting team for the bond sale, which included Goldman Sachs as co-senior manager and A.G. Edwards, Estrada and Loop as co-managers. CIFG provided municipal bond insurance for the issue.

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