CHICAGO — The Ohio Water Development Authority tomorrow will begin taking retail orders on $225 million of triple-A rated refunding revenue bonds as part of its water pollution control loan fund program.
The agency expects to save roughly $30 million — achieving a 14% net present-value savings — by refunding and shortening the life of the bonds, said chief operating officer Scott Campbell.
Merrill Lynch & Co. is senior underwriter on the deal. Wells Fargo Securities is co-senior, leading a team of four additional underwriters. Squire, Sanders & Dempsey LLP is bond counsel.
Standard & Poor’s rates the water quality bonds AAA. Moody’s Investors Service, which has an equivalent Aaa rating on the authority’s fresh water and drinking water programs, had not released a rating as of Friday.
The refunded bonds feature a final maturity date of 2019, eight and a half years earlier than the original bonds, which were issued in 2004 and 2005. The restructuring will require the authority to pay more debt service over the next few years but achieve savings by taking advantage of the lower interest rates at the short end of the yield curve.
“We started working on a traditional refunding and realized we could increase our savings by shortening up the life of the bonds,” Campbell said. “From a cash-flow perspective, the amount we pay in debt service will be more than if we had not done the issue but it will achieve a savings in the long run.”
The state established the water pollution control loan fund program in 1989 in order to make loans to local governments for construction of publicly owned wastewater treatment works or other pollution management programs. Among the fund’s top borrowers are Columbus, which accounts for 23% of total outstanding loans; Toledo; the Northeast Ohio Regional Sewer District; and the Hamilton County Metropolitan Sewer District.
Also this week the authority plans to sell $26 million of community assistance refunding bonds to pay off outstanding notes. The sale is scheduled for Sept. 17.
The issuer also plans two new-money issues over the next six months to finance its drinking water and clean water state revolving loan fund programs, according to Campbell.
Meanwhile, the Ohio Public Facilities Commission also expects to enter the market with refunding bonds this month, followed by several more issues before the end of the year.
It plans to refund roughly $250 million in outstanding general obligation debt the week of Sept. 21, said Larry Scurlock, the state’s assistant debt manager. Jefferies & Co. will act as lead underwriter on the transaction. The commission expects to achieve a 5% net present-value savings on the refunding, Scurlock said.
In October the agency plans to sell roughly $90 million in a mix of taxable and tax-exempt bonds to finance the popular technology advancement Third Frontier program. RBC Capital Markets Inc. is lead underwriter on the deal.
The commission has three additional bond issues planned for the rest of the year, including $45 million in site development bonds slated for sale in November, and two GO bond issues totaling $80 million scheduled to sell in December.
