Kentucky closes on bridge bonds
LOUISVILLE, Ky. (WDRB) – The bond deal that will pay for Kentucky's share of the Ohio River Bridges Project closed on Friday, state officials announced.
Investors had purchased roughly $728 million in bonds and other debt last week – the final piece of the state's financing for a new downtown bridge and a redesigned Spaghetti Junction interchange.
Earlier this year, Indiana secured financing for its part of the $2.6 billion project – a new bridge between Prospect, Ky., and Utica, Ind.
Kentucky's financial close is a "significant milestone," Transportation Secretary Mike Hancock said in a news release.
"We are gratified by the strong investor demand we found last week," Hancock said.
Moody's Investors Service and Fitch Ratings classified the debt as "investment grade," although both rating agencies gave the bonds and the bond-anticipation notes their lowest possible ratings before they consider the debt to be "junk," or high-risk.
Moody's Investors Service based their ratings on an uncharted tolling environment in Louisville, alternatives to new toll bridges and debt payments that increase over time.
Those factors, and the overall complexity of the downtown bridge project, are "significant credit risks," according to Moody's analysts.
Fitch Ratings analysts noted that established traffic patterns across the Ohio River help offset the risks associated with a new eastern bridge.
Moody's and Fitch gave the bonds a "stable" outlook – and orders for the bond issue reached nearly $3 billion, according to the state.
Fitch noted that the project financing benefits from the ability to increase tolls by an oversight group of Kentucky and Indiana officials, but "[T]he bi-state nature of the toll approval process could result in delays to increases when requested."
Moody's analysts wrote that the project strengths include proven downtown traffic, and they expect enough toll revenue to meet debt payments, as well as reserve accounts.
At the same time, Moody's warned that drivers may choose to avoid tolls downtown by taking the adjacent Clark Memorial Bridge or I-64 Sherman Minton Bridge.
Overall, Kentucky sold $276 million in toll backed bonds and $452 in bond-anticipation notes. The notes will be used to help pay for construction but are to be replaced, starting in 2017, by a federal transportation loan.
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