The Register-Herald, Beckley, West Virginia

Local News

May 2, 2008

Pike board refinances $59 million at lower rate

By Mannix Porterfield

Moving to dump its insurer and get out of an interest squeeze prompted by a national subprime fiasco, the West Virginia Parkways Authority agreed Thursday to refinance $59 million in bonds and drop its rates back into single digits.

“It’s kind of like refinancing a home,” turnpike manager Greg Barr explained.

“You’re paying a higher interest rate now. By refinancing them (bonds), we lock into a lower interest rate going forward.”

Trouble surfaced last Valentine’s Day when Moody’s Investors Service dropped Financial Guaranty Insurance Co.’s credit rating from the top-ranked AAA to A3.

A lower rating translates into soaring interest, in turn, digging deeper into the turnpike board’s account.

Bonds are held by a variety of sources, such as large pension investments and mutual funds, noted authority chairman Joe Martin.

“Because they’re a variable rate, and the interest rate is reset each week, the ownership actually can change each week,” he said.

Now that the umbilical cord to FGIC has been severed, just who will provide the insurance?

“We’ll pledge the full faith and credit of the Parkways Authority and not the state,” Martin said.

“We are stronger financially than the bond insurance companies.”

This doesn’t mean, in a hypothetical sense, that the possibility exists that a firemen’s pension account in Minneapolis one day might wind up with the deed to the 88-mile turnpike.

“No,” Martin emphasized when such a scenario was suggested.

“We’ll be in a much stronger financial position by taking the steps we’re taking now. We’ll reduce the interest rates and consequently the weekly interest cost substantially. That will strengthen the Parkways financially and assure its continued operation under traditional standards.”

Bond counsel Roger Hunter pointed out the interest rate had jumped to 10 percent, but the move taken by the board would drop it back into the 4-point range.

The adjustment means that the full maturity of the bonds is targeted exactly 11 years from now.

“It may be a little bit shorter, but it won’t be any longer,” he assured the board.

— E-mail: mannix@register-herald.com

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