The bond market gave Oklahoma a warm welcome on its $55.5 million refunding on June 23.

DALLAS - Oklahoma enjoyed a strong response from the bond market with a $55.5 million refunding more than two-and-a-half times oversubscribed.

Issued in the name of the Oklahoma Capitol Improvement Authority, the serial revenue bonds rated AA by Standard & Poor's and Fitch Ratings drew yields of 2.71% on 4% coupons maturing in 2024. Morgan Stanley & Co. was book runner on the deal that priced June 23.

The bonds refunded all of a Series 2004A issue except for bonds maturing this year. Net present value savings were about $6.6 million, said State Bond Advisor James C. Joseph.

"There was a very strong investor response," Joseph said. "There were $140.3 million in total orders for $55.5 million of Series 2014B bonds, allowing a re-pricing of several maturities in the issuer's favor."

The original bonds were issued for capital projects at 18 state agencies or authorities. Repayment on the bonds comes from these separate state agencies from their budget allocations.

Oklahoma has only $177.53 million of general obligation bonds outstanding, with $1.16 billion of appropriation-backed debt issued by the OCIA, and $749.8 million of appropriation-backed debt issued by the Oklahoma Development Finance Authority.

"Debt levels are low, and tax supported debt is amortized relatively quickly," noted Fitch analysts Marcy Block and Karen Krop. "Most new issuance is in the form of lease revenue bonds. The unfunded pension liability for state employees has improved following significant pension reform."

The state plans to issue between $80 million and $85 million of OCIA bonds in July or early August to provide for the conversion of an outstanding variable rate demand bond to fixed rate, Joseph said. Goldman Sachs has been selected as senior manager and fixed-rate remarketing agent for that transaction.

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