Alaska, flush with oil-related revenue, is selling about $166 million of general-obligation debt this week in its first issue with top grades from the three major ratings companies.
The deal is Alaska’s inaugural transaction since Fitch Ratings raised its grade one step to AAA on Jan. 7. The state has never had the top rating from Fitch, said Elizabeth Fogerty, a spokeswoman for the New York-based company. Fitch cited Alaska’s “substantial and growing reserve balances,” with three funds expected to total $23 billion in fiscal 2019.
“We’re thrilled,” Angela Rodell, Alaska’s deputy commissioner of revenue, said from Juneau. “It reflects the strong financial position of Alaska.”
There are now eight states with the highest general- obligation grades from all three rating companies -- Fitch, Standard & Poor’s and Moody’s Investors Service -- data compiled by Bloomberg show.
Ten-year tax-exempt debt of Virginia, a member of that group, has a yield-to-maturity of about 1.87 percent, data compiled by Bloomberg show. Investors demand a spread of about 0.13 percentage point over benchmark debt for the bonds, little changed from when they were issued in February, the data show.
Alaska, which has no income levy, is selling the bulk of the debt as federally tax-exempt securities, with about $12 million coming as taxable qualified school-construction bonds. The sale will fund projects such as a high-school aquatic facility and the state library, bond documents show.
Funding most capital needs through current revenue, the 49th state rarely issues debt, said Fitch, which rates $576 million of Alaska general obligations. About 92 percent of general-fund revenue for fiscal 2013 comes from petroleum- related activity. North Slope West Coast oil prices averaged $112.65 a barrel in fiscal 2012, compared with the state’s budget forecast of $94.70, according to Fitch.
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