The State Bond Commission approved a resolution on Nov. 20 to refinance the outstanding 2022 gas-and-fuels floating-rate notes by issuing variable-rate demand bonds (VRDBs) and maintaining existing interest-rate swaps as hedges.

Staff explained the mechanics: the existing series 2022 notes indexed to SOFR will be replaced by VRDBs remarketed by a remarketing agent; bondholders may tender bonds to the remarketing agent, and a TD Bank letter of credit would back purchases in the event remarketing fails. If TD Bank does not perform under the letter of credit, staff said the state would not be obligated to fund purchase prices.

Staff said swaps currently pay a fixed rate while the state receives a variable rate tied to 70% of SOFR plus 8.01 basis points; the state's floating payment is effectively offset by the variable rate it receives on the swaps. The VRDB structure is similar to the 2023 series and is expected to produce a lower spread than the 2022 bonds being refinanced.

Staff recommended proceeding; the commission was scheduled to price the bonds Dec. 9 and to close Dec. 10. Representative Reiser moved approval; President Henry seconded and the motion passed by voice vote.