BRADENTON, Fla. - The Kentucky State Property & Buildings Commission is pricing $144.4 million of revenue bonds Tuesday for retail investors.

Depending on the retail reception, the SPBC sale will culminate with institutional pricing Tuesday or Wednesday.

Proceeds of the tax-exempt deal will be used to permanently finance a $45 million short-term loan from Citi, provide funding for economic development and capital projects, and refund a small amount of debt.

The transaction is structured as $136.25 million of Series A bonds with serial maturities between 2014 and 2023, though subject to change during final pricing.

Some $8.26 million of Series B bonds will refund certain maturities of outstanding bonds maturing in 2016 through 2021.

The refunding is being done for economic reasons within existing maturities, said Ryan Barrow, executive director of the Office of Financial Management.

It is estimated that the refunding will generate present-value savings of nearly $910,000 or about 9.9% of refunded par, he said.

As with most of the state's transactions, the SPBC bonds are special and limited obligations payable from a lease agreement between the commission and the Kentucky Finance and Administration Cabinet.

Lease payments are subject to a biennial general fund appropriation by the General Assembly.

The bonds are rated A-plus by Fitch Ratings and Standard & Poor's, and Aa3 by Moody's Investors Service.

Fitch and S&P affirmed their A-plus ratings on the state's $4.1 billion in principal of appropriation-backed bonds, which will be outstanding following this week's sale.

The deal is the first sizeable offering from the State Property & Buildings Commission in about two years, so it is expected to get favorable attention from the market, said Barrow.

"The underwriters have indicated that they expect a good investor reception for commission's bonds and we expect a successful pricing," he said.

Analysts noted that Kentucky is experiencing economic recovery from the downturn, though the Commonwealth's budget has been weakened structurally through the use of one-time revenues for recurring obligations, depleting reserves, debt restructuring, borrowing for operation, and poorly funded pensions.

S&P said it places a negative outlook on Kentucky because of the state's "weakened pension funded levels and failure to adequately fund post-retirement benefits in this biennium."

Though the General Assembly adopted pension reform measures earlier this year for the Kentucky Employees Retirement System, State Police Retirement System, and County Employees Retirement System, S&P analyst John Sugden said "the actuarial impact has yet to be quantified."

"Even under the recently adopted reform, the state will not fully pay its actuarially required contribution until the next biennium," Sugden said. "Although the state has identified some funding sources for meeting its ARC payment in fiscal 2015, the identified funding is insufficient to cover the entire increase in pension payments."

As of the June 30, 2012 valuation, the combined unfunded liabilities for the three pension plans were approximately $26.2 billion and the overall aggregate funded status of the plans was 49.9%, according to S&P. The separate Kentucky Teachers Retirement System is funded at 54.5%, and has an unfunded liability of $12.2 billion.

"We will continue to monitor and evaluate the impact of reform efforts on Kentucky's long-term liabilities and budget," Sugden said.

Citi is book-runner for this week's offering. Others in the syndicate are Morgan Stanley, J.J.B. Hilliard, W.L. Lyons LLC, Raymond James & Associates Inc., Edward D. Jones & Co., Stern, Agee & Leach Inc., PNC Capital Markets LLC, Stifel, Nicolaus & Co., First Kentucky Securities Corp., and Ross, Sinclaire & Associates.

Peck, Shaffer & Williams LLP is bond counsel. Frost Brown Todd LLC is underwriters' counsel.

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