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Sources: JobsOhio Delays $1.5B Deal After High Court Accepts Challenge

CHICAGO -- JobsOhio has delayed a $1.5 billion liquor-profit backed bond deal after the deal ran into new legal complications Wednesday, according to some market participants.

The Ohio Supreme Court Wednesday said it would hear an appeal from a nonprofit group that has challenged the newly created agency’s plan to take over the state’s liquor system for 25 years and use the revenue for economic development.

The court’s decision came after months of waiting and just a few hours before the finance team was set to price the first part of the deal Wednesday, $423 million of tax-exempt bonds.

A $1.1 billion taxable series was set to price Thursday.

Underwriting desks at JP Morgan Chase and Citi, the two senior managers, would not comment mid-Wednesday on whether the pricing was postponed, but the delay was confirmed by other market sources. Another source said the state was deciding whether to move ahead and still had not made a decision by late Wednesday.

The court will hear an appeal by ProgressOhio to a lower court’s ruling that the non-profit group lacks standing to challenge the constitutionality of Gov. John Kasich’s plan to create JobsOhio and allow it to lease the liquor distribution system for 25 years to fund economic development efforts.

The state has already delayed the deal for a year due to the lawsuit and some investors ahead of the deal said they were wary of the unresolved lawsuit surrounding the deal.

JobsOhio was set to sell $1.5 billion of taxable and tax-exempt bonds backed by the liquor profits to finance the lease. The agency would use $500 million of the proceeds to pay the state for the lease. Another $744 million of taxable bonds will be used to defease outstanding liquor-backed debt and the remaining $225 million would be used for job creation efforts.

“We have said all along the constitutional questions hovering over JobsOhio deserve to be resolved,” ProgressOhio said in a statement. “Today’s Ohio Supreme Court decision to hear our appeal deals a blow to the Kasich administration’s legal gamesmanship, in which they are asserting no one has the right to sue over the constitutionality of JobsOhio.”

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