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DOT News Release: HDOT Highways Division funds $100 million at historically low rates, refinances debt for significant savings

Posted on Nov 14, 2019 in Latest Department News

HONOLULU – The Hawaii Department of Transportation (HDOT) is pleased to announce that it has successfully issued new highway revenue bonds that will provide funding to advance critical projects that will help preserve the State highway system and improve safety.  In addition, HDOT exercised fiscal prudence to refinance prior bonds for significant savings.

The new bonds will fund $100 million of key highway capital improvement projects that will enhance and improve Hawaii’s statewide system of highways, streets and roads.  The bonds have an average interest rate of 2.82% with a final maturity in 2040.

HDOT also successfully refinanced $27 million of outstanding revenue bonds, reducing annual debt payments.  The bonds that were refinanced were originally issued in 2011 with an average interest rate of 4.89%.  The new bonds have an average interest rate of 2.41%. The refinancing will generate $4.5 million of savings for the Highways Division over the next 13 years.

In preparation for the bond sale, the Highways Division’s management team led an extensive marketing campaign, highlighted by an online investor roadshow that was viewed by over 15 investors, digital advertising on local websites, and in-person meetings with investors in Hawaii and on the mainland.  As a result, the bonds received an overwhelming response from investors, with over $350 million of orders from Hawaii and national investors.

“Today’s bond sale results are positive for the state and its people,” said Gov. David Ige. “The market continues to have strong confidence in Hawaii’s Highways Division and its ability to deliver crucial projects to improve our roads and enhance safety.”

Prior to the bond sale, the Highways Division’s credit quality was reviewed by Moody’s Investors Service and S&P Global Ratings.  Moody’s upgraded the Division’s credit rating to Aa1 from Aa2 while S&P affirmed the Division’s rating of AA+.  The Moody’s upgrade brings the Division’s bond rating to within one notch of the highest possible rating of Aaa.  The improved credit rating and strong market conditions were instrumental in allowing the Highways Division to obtain a historically low interest rate on its bonds.

In their review, the rating agencies cited the Highway Division’s strong coverage of its annual debt obligations by pledged revenues, the diversity of the pledged revenue stream, and the State legislature’s demonstrated willingness to add new pledged revenues to fund the State’s highway program. Also noted was the strength of the State’s economy and effectiveness of HDOT management.  In addition, Moody’s noted the Highways Division’s growing focus on improved project delivery, recognizing that the Division reduced its unexpended federal highway aid balance from $950 million in federal fiscal year 2010 to $450 million in federal fiscal year 2019.

Morgan Stanley served as the lead managing underwriter for the bond sale, with Well Fargo as the co-senior manager.  A Hawaii-based selling group was utilized to market the bonds to local retail investors.