Alaska issued $110.1 million in bonds to refund previously issued securities.
The bonds mature between 2026 and 2033, yielding between 2.94% and 3.22%. They pay interest at 5%. The securities received a rating of AA from Kroll Bond Rating Agency, Aa3 from Moody’s Investors Service, and AA from S&P Global Ratings, which upgraded Alaska’s rating from AA-.
“The upgrade incorporates our view of Alaska’s financial stability and considerable budgetary surpluses achieved over three consecutive fiscal years, which we believe reflects the state’s prudent management of expenditure growth within budgets and conservative revenue forecasting as energy prices have rebounded,” S&P analyst Thomas Zemetis said in a press release.
Oil makes up a significant portion of Alaska’s revenue, so higher energy prices often translate to government surplus. When Russia’s full-scale invasion of Ukraine drove oil prices to an eight-year high of $91.41 per barrel in 2022, Alaska recorded a $1.6 billion surplus; the year before, when oil sold for $54.14 per barrel, the state recorded a $248 million loss, according to the official statement accompanying the sale of the bonds.
The issuance comes as soaring global tensions make forecasting the oil market increasingly difficult. The Alaska Department of Revenue forecasts that oil will sell for $73 per barrel in fiscal year 2024 and $70 per barrel in FY 2025, but the bond documents note that “uncertainty remains about future prices as geopolitical factors continue to influence prices.”
Alaska will use the issuance proceeds to refund bonds that it sold in 2010.
The bonds are general obligations of the state, backed by its full faith and credit.
Goldman Sachs & Co LLC served as lead underwriter on the issuance, purchasing the bonds for $123.5 million. The price reflected a premium of more than $13 million. Acacia Financial Group, Inc acted as financial advisor.