DALLAS — The Louisiana State Bond Commission wants to look at its options before deciding how to proceed with a planned negotiated refunding of state general obligation debt.

Commissioners gave Director Whit Kling and financial advisor Renee Boicourt of Lamont Financial Services Corp. the authority to seek bids for a private placement of the refunding bonds.

If a private placement provides more savings than a conventional sale, they can make the transaction.

Treasurer John N. Kennedy said he would convene a special session of the commission if one is needed to approve the decision by Kling and Boicourt.

Louisiana wants to refund some maturities outstanding from $650 million of refunding bonds issued in January 2005.

The unconventional approach may be best one for the state, Kling said at Thursday's Commission meeting.

An initial analysis of the refunding determined savings of up to $10 million or more from a conventional negotiated sale, he said.

However, recent interest rates have taken some maturities off the shelf and pushed the projected savings down to as low as $2.5 million over the next six years, Kling said.

"With a direct placement, we might realize savings of $5 million to $6.5 million," Kling said.

The Commission had three possible avenues for the refunding, he said.

"You can go the conventional negotiated deal, you can get bids for a direct placement, or you can do nothing and wait for the market to get better," Kling said.

If the private placement bids are not as good as is hoped, Kling said, the refunding then can be accomplished with a negotiated sale.

"It doesn't hurt anything to ask (for bids)," he said.

"I think it is a great idea," Boicourt said.

The Commission selected Morgan Stanley as the lead manager if a negotiated sale is seen as the best option. Junior managers include Loop Capital Markets and Raymond James.

Foley & Judell was selected as bond counsel.

The Commission gave final approval to an $82 million refunding of gasoline tax bonds that will replace $60.6 million of outstanding weekly variable-rate debt with fixed-rate 30-year debt. The debt was issued in 2009 as taxable Build America Bonds.

Proceeds will also cover $17 million of floating-to-fixed hedge agreements associated with the bonds that had a hard put of Nov. 1.

Another $121.3 million of state gasoline tax bonds with two hedge agreements must be refunded before a similar hard put on May 1, Kling said.

The two refundings will leave four long-term hedge agreements in place, he told the Commission.

"You'll probably be stuck with those four agreements for a long time," Kling said.

The swaps would cost the state $117 million if they were terminated now, Kling said.

A refunding of state tobacco settlement revenue bonds in early July was defended as a "good deal for the state" by Commissioner of Administration Kristy Nichols. She said the $659.7 million deal by Louisiana Tobacco Settlement Financing Corp. generated $82.5 million in savings despite a volatile market.

"It was certainly an interesting transaction," said Nichols, a member of the Bond Commission.

Kennedy, who clashed with Nichols over the structure of the tobacco refunding, questioned the fees paid to underwriters and Public Resources Advisory Group, financial advisor on the sale.

Thomas Green of Citi, the senior manager, said the underwriting syndicate received $1 million. William Cobbs of PRAG said the company's fee totaled approximately $650,000.

The refunding was structured to provide early savings and avoid risks to the revenue stream, Cobbs said.

Kennedy supported refunding the tobacco bonds, but contended unsuccessfully that the focus should be on long-term debt service relief.

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