The Arkansas Highway Commission is on track to save about $14 million in interest in a bond refinancing deal that is scheduled to close next month.
The savings amount was slightly higher than the $12.8 million the commission was projected to save when it approved the proposal in December.
"This may be the best news we've ever been presented out here in short form," commission chairman Robert Moore Jr. of Arkansas City said at the commission's meeting Wednesday after a brief presentation on the transaction by Dennis Hunt, an executive vice president and head of public finance for Stephens Inc.
The 2013 bonds were issued to support the Arkansas Department of Transportation's $1.8 billion Connecting Arkansas Program, an ongoing construction initiative focusing on 36 regionally significant highway projects covering about 200 miles.
To help pay for the program, voters in 2012 approved Amendment 91 to the Arkansas Constitution, which added a 0.5% sales and use tax to the statewide sales tax and devoted the proceeds to state, city and county road construction. The sales tax is in place for 10 years.
The proposal the commission approved focused on bonds with outstanding principal totaling $287.7 million that would have come due in June 2022 and June 2023 with debt service totaling $304.9 million, according to Hunt.
Stephens Inc. has been the financial adviser for all bond series issued under Amendment 91. A total of $468.9 million in bonds has been issued under the amendment.
Because of lower interest costs, total debt service on the bonds' re-financing was estimated at $292 million, or $14 million less than the 2013 bonds.
Nine securities firms submitted bids when the sale of the new bonds was conducted on March 11. J.P. Morgan Securities LLC submitted what Stephens said was the lowest and best bid. The purchase price of the Series 2021 Bonds was $290.2 million, which included a $22.1 million premium to get a higher interest rate.
Moore and the other four commission members -- vice chairman Alec Farmer of Jonesboro, Philip Taldo of Springdale, Keith Gibson of Fort Smith and Marie Holder of Little Rock -- voted on a motion to accept the bid and authorize the sale.
The closing and transfer of funds is scheduled to take place April 14, according to bond documents Stephens prepared.
The transaction came together over several months, spurred in part because of favorable interest rates and the fact that an option to redeem the 2013 bonds early was coming up in June.
Hunt previously likened the arrangement to a homeowner refinancing a mortgage with a more favorable interest rate, resulting in paying less interest and having a lower monthly payment.
At the meeting, Hunt said the cost of the issuance was about $300,000, which was included in the true interest cost price that J.P. Morgan Securities paid. It includes payments to Stephens Inc. and the bond counsel, the Little Rock law firm of Friday, Eldredge & Clark, as well as preparing the sale, printing costs and other expenses, he said.