CHICAGO — The Ohio Water Development Authority will price $451 million of triple-A rated water pollution control bonds Thursday, the bulk of which will be taxable Build America Bonds.

The finance team will hold a retail order period Wednesday for the tax-exempt piece of the transaction, which is tentatively placed at $24 million.

Morgan Stanley is the senior book-running manager, with eight other firms rounding out the underwriting team. Squire, Sanders & Dempsey LLP is bond counsel, and RBC Capital Markets is financial adviser.

It’s the OWDA’s second large borrowing for its water pollution-control loan fund so far this year. In January it sold $366 million of tax-exempt bonds. The volume is tied in part to local government efforts to meet federal and state environmental sewer-upgrade mandates, said chief operating officer Scott Campbell.

“It’s atypical of us to do two large issuances” out of the water pollution-control loan fund program, he said. “One of the primary factors that is driving the larger volume of loans in 2010 is the [combined sewer overflow] work.”

The OWDA uses proceeds from its bond sales to make loans to governments that need to finance water pollution projects. Borrowers currently pay an interest rate of 3.25% on the loans.

The agency expects to save between 33 basis points and 100 basis points — depending on maturity and make-whole features — by issuing BABs instead of traditional tax-exempt debt, Campbell said.

“We took a strong look at BABs in January, but there was not enough savings associated with BABs then to justify issuing them,” he said. “It’s a different marketplace now.”

The tentative structure includes a 2019 maturity for the tax-exempt bonds and a final maturity of 2034 for the BABs.

The debt carries triple-A ratings from Moody’s Investors Service and Standard & Poor’s. The rating reflects the size and credit quality of the borrower pool as well as the cross-collateralization of the pollution control program with the triple-A rated drinking water assistance fund program, analysts said.

Separately, the Ohio Air Quality Development Authority will refinance $234 million of pollution control revenue bonds as early as Tuesday on behalf of FirstEnergy Corp.

The transaction will convert the debt into a commercial paper mode from a weekly remarking mode, officials said. FirstEnergy is an electric company headquartered in Akron that operates seven electric utility companies.

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