Revenue bonds amounting to $40.5 million to fund capital improvements at the Port of Lake Charles will be sold in the municipal bond market Wednesday, Nov. 20, according to port executive director Bill Rase, and local investors will receive purchase priority.
The Port’s bond issue comes on the heels of a rating of A3 from Moody’s Investors Service (Moody’s) and a rating of A- from Standard & Poor’s (S&P).
David Moffett, an investment banker with Jefferies LLC, said his company is underwriting the bond sale. “The order period for bonds will begin on Wednesday morning at 8:30 a.m. CST and continue for about two hours, or until it is sold entirely. The revenue bond sale will close on Dec. 4 and investors will begin accruing interest at that time,” he said.
Southwest Louisiana residents will be given order priority to invest in the bonds, Moffett said. “Area residents will have the first opportunity to invest in the community.”
Bonds will be available in denominations of $5,000, and interest will be paid semi-annually. Bank of America Merrill Lynch and Morgan Stanley are the selling group members. Certain bond maturities will be exempt from federal and state income taxes, while others will be subject to the Alternative Minimum Tax (AMT).
Bonds may only be purchased through a broker and through a final Official Statement. Potential investors are instructed to contact Bank of America Merrill Lynch at 337-491-0700, Morgan Stanley on Lake Street at 337-479-7610 or Morgan Stanley on Pujo Street at 337-439-9461.
The rating agencies referenced the Port’s prudent liquidity and expense policy, the expected effective management of the Port’s capital program, and the announcement of several projects that will be located on Port property as key factors to receiving the favorable bond ratings.
Within the past 24 months, projects totaling almost $50 billion have been announced by companies planning to do business in the area, with many of those projects locating on Port property. Among those companies are Sasol North America, Trunkline LNG, Golden Nugget Casino Resort, Lake Charles Clean Energy, Sempra Energy, IFG Port Holdings, Magnolia LNG and G2X Energy. Initial reports from these companies estimate the projects will create nearly 18,000 construction jobs and 14,000 additional direct and indirect jobs.
The Port finished the 2012 fiscal year with nearly $34 million in operating revenues and nearly $14 million in Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), a measure of the Port’s operating cash flow.
“The Port of Lake Charles’ forward-looking management team and visionary board of commissioners gives us an advantage in the market,” said Rase. The U.S. Army Corps of Engineers recently ranked the Port of Lake Charles as the thirteenth-busiest port in the nation, based on cargo tonnage.
“The funds will be backed by monies the Port has in secure revenue from companies operating here. The bonds will not be dependent on a tax,” said Rase. “This will allow the Port to build two new docks and complete many other capital projects, which we expect to generate even more revenue and lead to the creation of more jobs.”
The $40.5 million bond sale is the first issue since the Louisiana State Bond Commission in October approved up to $100 million in Port bonds. The proceeds from these bonds will fund part of the Port’s $227 million capital improvement plan.
Future bond issues will be determined by further needs for improvements caused by industrial growth in the region.