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KDOT Receives High Ratings On Highway Bonds

Aug. 20, 1999 (Release 99-169)
FOR IMMEDIATE RELEASE
News Contact: Stan Whitley, (785) 296-3585

KDOT Receives High Ratings On Highway Bonds

Kansas Department of Transportation Secretary E. Dean Carlson announced today that KDOT has received bond ratings from each of the nation's top credit rating services on the first series of highway bonds authorized to be issued under the Comprehensive Transportation Program passed by the 1999 Kansas Legislature.

Carlson said that the bonds, which will be sold beginning next week, received ratings of "AA+" from Standard & Poor's Ratings Services, "AA" from Fitch IBCA, Inc., and "Aa2" from Moody's Investors Service. The ratings are a confirmation of KDOT's existing ratings.

The ratings assigned to KDOT's bonds by the three services are among the highest ratings nationally for this class of bonds. He added that moneys deposited into the State Highway Fund from motor fuel taxes, vehicle registration fees, sales taxes and federal aid reimbursements will be used to pay the debt service on the new series of bonds and KDOT's previously issued highway bonds.

Standard & Poor's Credit Wire of Aug. 12, 1999, stated: "OUTLOOK: STABLE. The outlook reflects the expectation of continued strong coverage from the diverse revenue stream and that KDOT will continue its practice of providing additional revenues in the event of additional debt requirements beyond the current authorization."

FITCH IBCA's press release of Aug. 13, 1999, said: "The high quality rating assigned to these highway revenue bonds reflects the large 3x legal coverage requirement, the success of the prior 10-year CHP program within 2 percent of estimates, the strong current coverage levels and the breadth of the securing revenues accruing to the state highway fund."

Moody's Investors Service press release of Aug. 19, 1999, stated: "The outlook for the revenue bonds of the Kansas Department of Transportation is stable, reflecting the breadth and stability of the program's revenue stream, the expectation that KDOT will continue to manage the program in a cost effective manner, and the state's strong tradition of supporting the maintenance and development of its highway infrastructure. Broad public support for highways and strong administrative management of this popular program, recognized as among the strongest, should maintain the strength of this high quality rating."

Carlson pointed out that the Preliminary Official Statement relating to the bonds contains financial projections which demonstrate that the moneys available in the State Highway Fund are projected to be seven times the maximum annual debt service for the new bonds and all other outstanding bonds. State Highway Fund moneys not required to pay debt service on KDOT's bonds will be applied directly for transportation improvements in the state.

The initial issue of bonds will be in the approximate principal amount of $400 million, which may be adjusted depending upon market conditions at the time of sale. The bonds will be available for sale to Kansas residents on Aug. 25. On Aug. 26, the remainder of the unsold bonds will be offered to all purchasers, including major institutional investors such as insurance companies and mutual funds.

"By giving priority on August 25 to Kansas residents, we will provide the people of Kansas an opportunity to actively participate in financing the improvements and economic benefits of our Comprehensive Transportation Program," said Carlson.

The investment firm of Salomon Smith Barney is serving as the Senior Manager for the issue and leading the bond underwriting effort for KDOT. Other underwriting firms that will participate in the management of the issue include A.G. Edwards and Sons, Inc.; Fahnestock and Co. Inc.; George K. Baum and Co.; Goldman, Sachs and Co.; Loop Capital Markets LLC; Merrill Lynch and Co.; and Paine Webber Incorporated.

The Secretary has also directed the managers to form a large selling group of securities firms to make certain bonds are available to interested Kansas residents. The underwriters and members of the selling group will make available preliminary official statements for the bonds.

The 1999 Kansas Legislature authorized the issuance of up to $995 million in highway revenue bonds to help finance the state's 10-year Comprehensive Transportation Program.

KDOT expects to receive a tax opinion that the interest on the bonds will be excluded from federal gross income. Kansas law provides that the bonds and the interest on the bonds are exempt from Kansas taxation.