Louisiana Sells Road Bonds Beating Market: Muni Deals

Louisiana is poised to sell $249 million in highway bonds this week with transportation debt beating top-rated municipal securities in 10 of the last 13 years.

The offering will fund restoration and improvement of about 690 miles (1,110 kilometers) of roads, bond documents say. The deal, with a 2033 final maturity, is expected to sell Jan. 23, Whitman Kling, Jr., director of the Louisiana State Bond Commission, said in an e-mail.

The total return for transportation securities has exceeded that for the $3.7 trillion muni market in all but three years since 2000, according to Standard & Poor’s index data. In 2012, the segment returned 15.2 percent, including price change and interest, against 14.3 percent for the broader index.

Truck and trailer registration taxes and fees will back payments to bondholders. While revenue in fiscal 2013 is expected to total $51 million, a 16 percent decrease from the previous year, that’s an improvement from a prior forecast, said Fitch Ratings. The company gives the securities an AA- rating, fourth-highest.

Such volatility isn’t unusual. Fitch said that vehicle fees have been affected by “multiple hurricanes” in the Pelican State and the 2010 Deepwater Horizon drilling rig explosion, which sparked the largest offshore oil spill in U.S. history.

2012 Law

The offering is a first for the bond program, which was established through legislation in 2012 to fund state roads ineligible for federal dollars, S&P said in a press release.

Louisiana had about $10.4 billion of tax-supported debt as of December, according to the offering statement. A state bond maturing in 2022 traded Jan. 18 with a yield of 1.74 percent, compared with a benchmark 10-year index at 1.69 percent, according to data compiled by Bloomberg.

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