The Foothill/Eastern Transportation Corridor Agency obtained a lower rate on 40-year, $125 million bonds on high investor demand.
The agency was able to reduce its rate to 3.95% compared to the prior 5% as demand exceeded $1 billion across 35 investors.
“There’s a search for yield in the market and there’s not a lot of supply as evidenced by a billion in orders,” said Terrence Loughran, a muni portfolio manager at the Irvine office of City National Rochdale. “It’s good time for a borderline investment grade deal to come to market and to lock in a long-term rate.”
The bonds were originally issued in 2013 by the Foothill/Eastern Transportation Corridor Agency as part of the refinancing of the original bonds issued to fund construction of the 133, 241 and 261 toll roads in northern and eastern Orange County. The toll road agency has about $2.4 billion in total outstanding debt.
The agency was required to seek a new rate before the initial five-year period ended next January, spokeswoman Lisa Telles said. The Irvine-based agency maintained the final 2053 maturity because long-term interest rates were more favorable than short-term rates.
The Foothill/Eastern Agency toll road system reported 9.4% growth in toll transactions in fiscal year 2016. Its bonds were recently upgraded by Moody’s Investor Service, reflecting an increase in both transactions and revenue for four consecutive years, as well as the strong local economy.
Earlier this year, the debt of San Joaquin Hills Transportation Corridor Agency, a sister toll road that connects John Wayne Airport to south OC, was upgraded by Fitch Ratings, S&P Global Ratings and Moody’s Investors Service.
The Foothill agency’s 36-year bonds were priced about 120 basis points over the benchmark Municipal Market Data (MMD) AAA 30-year scale, Loughran said. The bonds yielded more than the San Joaquin bonds because of lower ratings and a longer-time period.