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    August 2016
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Hawaii State Highway Bonds Sale Secures $247 Million, Saves State More Than $22 Million

On Aug. 10, 2016, the State of Hawai‘i successfully sold $204.485 million in Highway Revenue Bonds at the lowest interest rate in the history of the state’s Highway Revenue Bond Program. The sale raised $247.581 million.

Highways DivisionApproximately $120 million of the bond sale proceeds will be used to fund various highway projects throughout the state and about $127 million of the proceeds will be used to refinance existing state bonds. The refinancing will reduce debt service payments and save more than $22 million in interest costs.

“This financing is a tremendous success for the state, enabling continued investment in our infrastructure at a very affordable borrowing cost,” said Gov. David Ige. The low interest rates achieved demonstrate bond investors’ confidence in Hawai‘i’s economic strength and its continued practice of sound fiscal management. This is the result of years of discipline and conservative fiscal management.”

Moody’s Investors Service, Standard & Poor’s Ratings Service and Fitch Ratings affirmed the state’s strong bond ratings of “Aa2”, “AA+” and “AA,” respectively. Each rating agency also attached “stable” outlooks on their ratings, indicating secure future economic and financial trends for Hawai‘i. Rating agencies cited the stability and diversity of revenue streams that are pledged as security for the bonds, as one of the key strengths of the credit.  Other strengths cited include strong legal provisions, high debt service coverage, and stable revenue trends, particularly in those sectors that are less reliant on economic activity.

The marketing plan for the bonds included investor presentations, both in-person in Hawai‘i and on the mainland, as well as internet-based presentations and conference calls. The extended marketing generated strong demand for the bonds from institutional investors.

There was very strong demand for the bonds by both Hawai‘i and national investors. Orders for the bonds amounted to 4.5 times the amount available for sale. The strong demand resulted in net interest rates on the bonds that ranged from 0.50 to 2.50 percent, with the average net interest rate less than 2.25 percent. This is the lowest rate the state has achieved since starting the Highway Revenue Bond Program in 1993.

“The success of the recent bond sale and the low interest rate on the offering is due in no small part to the hard work of the Highways Division in adhering to its sound fiscal and debt management policies,” said Ford Fuchigami, director, Hawai‘i  Department of Transportation. “We are extremely pleased with the demand for the bonds and the needed infusion of capital the Highways Division will receive from the sale.”

The bonds were sold by a financing team led by Robert W. Baird & Co. Incorporated, serving as book-running senior manager and Morgan Stanley and Wells Fargo Securities, serving as co-senior managers.

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