Municipal Bond Forum
Santa Rosa Bay Bridge zeros
Q
I was wondering if the Santa Rosa Bay Bridge Zero Coupon Issue CUSIP 802576BU1 (AAA MBIA-IBC Insured) bonds are in default and if this issue is subject to an extraordinary redemption where they can be called at their original issue price of 23.449?
A
James A. Klotz responds:
No, Santa Rosa Bay Bridge bonds are not in monetary default and continue to pay interest and principal on time. Although the bridge project has not performed at the levels originally projected, all payments have been made. Along with construction funds, the bond issue included sufficient monies to fund a “debt service reserve” fund to be used should revenues be insufficient to pay debt service.
This fund has been used to supplement toll revenues and has insured full and prompt payment to all bondholders. In the last year, bridge traffic has escalated significantly and is close to producing sufficient funds to support principal and interest payments as they come due.
Although debt service will increase on an annual basis in the future, we will watch to see if traffic growth increases as well. The “AAA” bond insurance on your bonds also insures prompt payment. In the worst case, it would be unlikely that the insurer would choose to redeem the bonds early since that would require the insurer to fully fund the principal rather than relying on toll revenues. Since the bridge is a public infrastructure project, there would also be little incentive for attempts to seize it as an asset. Santa Rosa Bay Bridge is operated and maintained by the state of Florida and therefore, we believe the state has a strong interest in the long-term success of the project. We believe the bridge will be given a longer time span to prove that it can generate enough toll revenues to allow it to become self sufficient
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