Ohio Water Authority Kicks Off Retail Period for $400 Million

CHICAGO — The Ohio Water Development Authority today will begin taking retail orders on $400 million of new-money bonds in a transaction that could include some taxable Build America Bonds.

Proceeds from the bonds will be used to fund the state’s water pollution control loan fund program. The debt is rated triple-A by Moody’s Investors Service and Standard & Poor’s.

Like Indiana, which also enters the market today with water loan fund bonds, Ohio expects high retail participation.

Retail buyers have shown increasing interest in the highly rated securities since last year, according to Scott Campbell, chief operating officer for the OWDA.

“Within just the last year we have started to do retail order periods — prior to that it was purely institutional,” he said. “As the market has evolved and changed, retail has become more important. The last series of bonds that we issued, in October 2009, we ended up getting 70% done retail.”

Authority officials will consider issuing some of the debt as taxable BABs, though they may be unwilling to extend the maturities to 30 years, where BABs tend to be most economically beneficial to issuers.

“The transaction [without BABs] amortizes within a 20-year period,” Campbell said. “If we went 30 years we could probably pick up more [interest savings] but I’m not sure we’re willing to extend that.”

Morgan Stanley is the senior book-running manager on the deal, leading an underwriting team of six additional firms. Squire, Sanders & Dempsey LLP is bond counsel and RBC Capital Markets Corp. is financial adviser.

The bonds will carry a pledge of loan repayments from the clean water program’s borrowers.

The program currently funds 1,200 projects with 430 borrowers. The largest borrowers are Columbus, which accounts for nearly 23% of s total loans, and the Northeast Ohio Regional Sewer District, which provides sewer services to about 328,000 customers in the northeast region of the state.

The sale marks the water authority’s first large new-money issuance since 2005. Campbell said it is likely the issuer will come to market annually with bonds in the future.

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