Baton Rouge: The state went to market December 17 to sell $113 million in Unclaimed Property bonds to fund portions of I-49 North and South, according to State Treasurer John Kennedy.
“I-49 is one of the state’s most important infrastructure and economic development projects, and work on the interstate can continue because of today’s bond sale,” said Treasurer Kennedy. “We’ve learned that we can’t rely on the fairy godmother in Washington D.C. to get this done for Louisiana. We came up with a plan, the Legislature approved it, and we’re moving forward with it. There’s still a lot of work to be done but this is a significant step forward in our efforts.”
The state sold approximately $113 million in Unclaimed Property bonds today at a favorable interest rate ranging from 2 percent to 5 percent. Approximately $92 million will be used to fund portions of I-49 North and $21 million to fund portions of I-49 South. Treasurer Kennedy expects an additional bond sale in the latter part of 2014 to help cover project costs for I-49 South.
As administer of the state’s Unclaimed Property program, Treasurer Kennedy developed the unique funding mechanism and bond sale for I-49. Each year, the Treasury collects around $57 million in unclaimed money, nearly half of which is returned to businesses and citizens statewide.
After paying auditing and related costs, $15 million is allocated to the I-49 Leverage Fund, and the remainder goes into the General Fund until Unclaimed Property owners make a claim. Using Treasurer Kennedy’s funding mechanism, the state will be able use the $15 million in the I-49 Leverage Fund to make debt service payments on bonds issued for the interstate.
“No one will lose his Unclaimed Property,” said Treasurer Kennedy. “This doesn’t change our promise to return this Unclaimed Property, and we will continue with our efforts to do so. It simply directs that $15 million of excess annual collections goes into a leverage fund dedicated to I-49 projects and debt service payments for those projects.”
The Unclaimed Property bonds were rated Aa3 by Moody’s and AA- by Standard & Poor’s. Because it is appropriation backed debt, the rating agencies rated the bonds only one notch below the state’s credit rating for General Obligation debt. In addition, the bonds are secured by a cooperative endeavor agreement with the state that provides that the state will take all necessary steps to make bondholders whole should collections fall short.
The underwriting team handling the Unclaimed Property bond sale included J.P. Morgan, Senior Underwriter; Morgan Stanley, Stephens Inc. and Drexel Hamilton, LLC, Co-Managers; Breazeale, Sachse & Wilson, L.L.P., Underwriters Counsel; Foley & Judell, LLP, Bond Counsel; and Lamont, Financial Advisor.