Published: April 03, 2008 09:37 pm      

Authority working to refinance $63 million bond debt

BLUEFIELD — An aggressive push is on by the West Virginia Parkways Authority to redo its outstanding $63 million bond debt so that it no longer uses an insurance company as collateral, in the wake of the sub-prime fallout that sent Financial Guaranty Insurance Co.’s credit rating plummeting.

It was back on Valentine’s Day that a financial massacre of sorts occurred, when Moody’s Investors Service dropped FGIC’s rating from the top-rated AAA to A3, a plunge that could prompt mounting interest rates, and thus cost the state more.

As with many financial institutions, Parkways Authority Chairman Joe Martin explained Thursday, FGIC departed from its original bonds-only business and expanded into insuring subprime mortgages. Of late, this activity has been swirled in a nationwide crisis, and evolved into a political issue.

Martin updated the board by explaining that the authority wants to dump FGIC and refinance its bonds to get out of a rising interest rate and into a more comfortable one that will save the state “a substantial amount of money” over the life of the bonds.

“We are hard at work to accomplish that,” bond counsel Roger Hunter told the board, emphasizing he hopes to have all the loose strings tied by mid-May.

“It’s an aggressive schedule. We think it’s doable.”

Afterward, Manager Greg Barr said the Turnpike, along with a number of municipalities and state governments, have been penalized through no fault of their own merely because insurers were downgraded to a low-investment type of rating.

“Our rates have gone up because of the bond insurers, not because of the Turnpike’s underlying rating,” he said.

“Basically, we’ve got $63 million in bonds outstanding. We’re going to do another bond issue for $63 million. Pay the old bonds off. And under the new issue, we’ll trade out underlying Double-A-minus rating and get back to a lower rate.”

Even then, the authority will still be locked into a variable rate.

“If we went to a fixed rate, we would violate terms of the legislative mandate that we can’t sell new bonds or do refunding bonds that exceed the par value of bonds being refunded,” Barr said.

Under the new arrangement being pursued, he explained, the underlying rating of the Turnpike would be its collateral.

“We would lower our interest rate from 7 percent back to 2 1/2 or 3 percent,” he said.

On another matter, general counsel A. David Abrams explained a new wrinkle in its pending deal with Gobis & Co. to allow Turnpike assets to bear advertising messages.

Any product to be marketed must pass muster of state and federal regulations, and not violate any standards of the outdoor advertising, Abrams explained.

Put simply, it means if something is considered in violation, “we don’t have to pay for it,” Abrams said.

Board members also were advised by Abrams that the authority is “extremely close” to working out a food contract with The Greenbrier to maintain its service at Tamarack.

In another issue, the authority awarded a $912,815.20 contract to W.Q. Watters Co. as the lowest bidder to paint Turnpike bridges.

Barr informed the board that the Turnpike’s five-year capital needs assessment shows that its deferred projects have gone from $150 million to $170 million.

“It’s something we have to continue monitoring,” he said.

Last year, an independent study by Public Resources Advisory Group (PRAG) suggested the authority would have to raise its tolls by 40 percent this year and by a like percentage in 2013 to keep up with maintenance demands in the face of rising costs. Without higher tolls, PRAG concluded, the Turnpike would have to shelve $300 million worth of road improvements.

During the Easter holiday weekend, figures show traffic was down from Thursday through Monday by 7.55 percent compared to the number of transactions in the same period a year ago.

— E-mail: mannix@register-herald.com