DALLAS – Louisiana Tobacco Settlement Financing Corp. will go to market this week with a $638 million refunding of revenue bonds despite postponing the sale Monday and Tuesday to avoid the turbulent municipal marketplace.

Louisiana Commissioner of Administration Kristy Nichols said Tuesday that the negotiated deal should occur this week.

“We had an extensive investor road-show last week, including both one-one-one meetings and group lunches, got a strong turnout, and we look forward to strong investor interest in the bond sale despite the difficult market conditions these past several weeks,” Nichols said in an e-mail statement.

“We are continuing to monitor market conditions in terms of timing, with cautious optimism that conditions will level out,” she said. “We will proceed in a way that's in the best interest of the state of Louisiana.”

Louisiana’s tobacco settlement bonds are rated BBB-plus by Fitch Ratings. Standard & Poor’s provided phased ratings, with the revenue bonds maturing from 2016 through 2023 at A, maturities from 2024 through 2033 at A-minus, and the final 2034 maturity at BBB-plus.

The bonds will refund bonds issued in 2001 supported by the state’s share of the 1998 Master Settlement Agreement with the tobacco companies. Louisiana securitized 60% of its payments with $1.2 billion of taxable and tax-exempt bonds.

The debt service schedule is structured to provide an estimated $142.8 million of savings in the first three years.

The deal structure was proposed by Gov. Bobby Jindal to support a college scholarship program that has been receiving up to $100 million a year from the general fund. The scholarship fund is allocated $60 million from the refunding in the fiscal 2014 budget.

Savings from the refunding are estimated at $67.2 million in fiscal 2014, $57.3 million in 2015 and $18.3 million in 2016.

The short-term savings structure was approved by the State Bond Commission at a special session June 6 with Treasurer John N. Kennedy as the sole opponent.

Kennedy supported the restructuring, but said it should have to provide lower debt service payments rather than initial savings.

The early-savings structure was the best method to secure the settlement revenues as tobacco use continues to decline, Nichols said after the Bond Commission authorization

“Tobacco consumption is decreasing and will likely continue to decrease,” she said then. “That fact makes the upfront savings approach both the safest option and the best long-term financial deal for the state.”

Citi is the senior bookrunner with Jefferies & Co. Inc. as co-senior manager.

Co-managers include Bank of America Merrill Lynch, Raymond James, Stephens Inc., Southwest Securities, Williams Capital Group LLC, and Siebert Brandford Shank and Co. LLC.

Public Resources Advisory Group is financial advisor to the tobacco finance panel.

Foley & Judell and Hawkins Delafield & Wood are co-bond counsel.

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