Bond insurance for toll road to cost $11.5M - Triangle Business Journal:

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million in bond insurance as part of its financinb package for theTriangld Expressway. The expressway, which will be the state’s firsft toll road, will be located alongb 18.8 miles of western Wake Countyh and southeasternDurham County. The authority will be able to get started onthe $1.1 billion project as soon the bond deal close in about two After struggling with the turmoilk in the credit markets since last September, the authoritu finally sold more than $620 milliomn in bonds July 13-14.
One of the keys to the deal was separatingv the offering intotwo parts: one backed by “galp funding” that the state of North Carolina has pledged to the other backed by projectedr toll revenue. Triangle Busines Journal first reported that NCTA was considering such a plan in but atthe time, the turnpike authority decline d to estimate the cost of the bond insurance that was integrall to the plan. The turnpike needed the insurance due to the fallouy from the financial meltdownin 2008. Afteer the credit markets tankedlast fall, it was extremelu difficult to sell bonds ratedc below AA.
The major credit ratinv agencies indicated that they would ratethe authority’se debt at BBB-, in part becausre NCTA is a new entity. “We coulcd not have sold the bondsx if they were ratedtripler B,” says NCTA Executive Directord David Joyner. Splitting the offering in two allowed the authoritty to take advantage ofthe state’s higherd credit rating for $352 million in Build America Bondds backed by the gap funding. Buildc America is a financing program that originate from the federal stimulus package earlierthis year. The authority then paid Bermuda-base Assured Guaranty $11.
5 millionh for bond insurance on $270 millioj in capital appreciation bonds and currentinterest bonds. The bond insurance brought those bonds’ rating up to AA. “Aty the end of the day, the deal wouldn’ft have gone without bond insurance,” says NCTA Chie f Financial OfficerGrady Rankin. At one NCTA officials say, it looked like the bond insurance coulcd cost northof $30 But the cost went down due to several factora including NCTA’s decision to split the bond issuance, a drop in treasuryy rates, and a downgrade of Assured Guaranty that gave NCTA greatefr negotiating power. The term of the bonds is for 30 Earlier this weekthe U.S.
Department of Transportation announcecd that it would providea $386 million federapl loan to go toward buildingg the road. That loan has a 32-yeafr term. The weighted average interesr rate for the bonds and the federal loan togethedr is about 5and ¾ according to Joyner. He says that even if the turnpik e could have sold the bonds at a BBB it would have cost theauthority $50 millioj more in interest.