Kentucky Gov. Steve Beshear is proposing as part of his fiscal 2011 budget to refinance as much as $500 million of internal state loans originally used to pay medical benefits of the Kentucky Teacher Retirement Systems.
Each current loan is amortized over 10 years at 7.5% and repaid annually from the general fund by approval of the General Assembly. The remaining average life of the loans is around 4.8 years but the state is not planning to extend maturities.
Beshear is proposing to sell the debt in two deals as serial, fixed-rate taxable notes to refinance the remainder of the existing obligations, according to Tom Howard, executive director of the financial management office in state’s Finance and Administration Cabinet.
The notes would be sold by the Kentucky Asset Liability Commission.
“We are working with KTRS to reconcile the amount of unamortized principal accrued to this juncture, but we anticipate that number to be less than $500 million,” Howard said in an e-mail.
If the note sale is approved, JPMorgan would be the senior managing underwriter and Kutak Rock LLP would be bond counsel. Howard said no sale dates have been established since the refinancing is still only a proposal.