DALLAS – Louisiana Tobacco Settlement Financing Corp. priced and sold $662.9 million of refunding bonds Tuesday to avoid a turbulent market on Friday with the release of national job numbers.
“The corporation priced ahead of Friday’s economic release on employment and the risk of an unfavorable reaction in the bond market,” said Commissioner of Administration Kristy Nichols.
The decision was made after receiving the results of Monday’s premarketing period by Citi, the lead underwriter for the tobacco bonds financing, she said Tuesday.
“By acting today we took the prudent step to capture as much savings as possible and before a potential rise in interest rates,” Nichols said.
Taking the refunding to market before Thursday’s holiday also “allowed investors to focus on the Corporation’s bonds ahead of a growing bond sale calendar in the coming weeks that may compete with this transaction,” she said.
The deal provided savings of $83 million, Nichols said, well short of the $143 million expected when the issue’s structure was approved by the State Bond Commission and the Joint Legislative Committee on the Budget before the recent market sell-off.
The state’s fiscal 2014 budget approved in May allocated $60 million from the refunding to the scholarship fund. Savings from the refunding had been estimated at $67.2 million in fiscal 2014, $57.3 million in 2015 and $18.3 million in 2016.
Nichols, who chairs the tobacco financing board, called the sale “a smart financial deal for the state” that will fund a college scholarship program.
State Treasurer John N. Kennedy said the state should have waited until next week to sell the bonds.
“I think they left money on the table,” Kennedy said. “I would have waited because I think the market was settling down but I understand this is what happens when you get yourself in a position where you have to sell in order to balance your budget.”
Kennedy was the only dissenting vote when the bond commission approved the deal structure because he wanted refunding savings distributed throughout the debt service schedule instead of the front-loaded savings in the adopted plan.