Bloomberg News

Oregon Issues Lottery Debt Surpassing AAA Securities: Muni Deals

April 01, 2013

Oregon’s Department of Administrative Services (28567MF:US) is selling $204 million of bonds backed by lottery revenue as previously issued debt beats top-rated securities.

Included in the borrowing, rated AAA by Standard & Poor’s, is $122.5 million in tax-exempt debt. Proceeds will go toward maintenance and improvement work as well as refunding debt for the Oregon University System, which is composed of seven schools and a branch campus. Among the projects is a seismic remediation program, bond documents say.

After declining during the 18-month recession that ended in June 2009, Oregon’s lottery revenue will continue its “recently resumed path of incremental growth,” S&P said in a release. The state expects it to total $1.1 billion from 2011 through 2013, $1 million more than was projected in December, according to bond documents.

Competition from possible Indian gaming or expansion of neighboring Washington’s lottery poses a challenge, said Moody’s Investors Service, which rates the debt Aa2, third-highest. Oregonians spent an average of about 1 percent of personal income, or $371, on gambling in 2011, unchanged from the prior two years, deal documents say.

Lottery bonds maturing in 2025 traded March 8 at a yield of 2.1 percent, down about 50 basis points from Jan. 31, according to data compiled by Bloomberg. Top-rated 12-year state and local debt yields rose about 6 basis points over the same period. A basis point is 0.01 percentage point.

Oregon plans to sell $92.5 million in lottery debt next year and $62.9 million in 2015, bond documents say. Lottery players in Oregon get back 67 percent of what they pay for tickets in winnings, second-best among states, according to 2010 data compiled by Bloomberg.

To contact the reporter on this story: Romy Varghese in Philadelphia at

To contact the editor responsible for this story: Stephen Merelman at

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