CHICAGO — Ohio will begin a retail order period Monday with institutional pricing scheduled for Tuesday for at least $416.7 million of general obligation refunding bonds.

The bulk of the transaction will push off debt service payments due in 2012 into future years.

Gov. John Kasich proposed postponing next year’s debt service payments to generate $440 million in savings for the current 2012-2013 budget. The money will be used for general fund purposes.

The refinancing is one of a handful of one-time measures used to balance the two-year budget. Others include leasing the state’s lucrative liquor distribution system and privatizing six prisons.

Pushing off near-term debt service payments to generate savings is not a new move for Ohio. The fiscal 2010-2011 budget, crafted under former Gov. Ted Strickland’s administration, included $736 million of refinanced debt to achieve savings.

This week’s deal features four tranches of GOs: $184.3 million of common schools bonds, $108 million of higher-education bonds, $98.8 million of infrastructure improvement bonds, and $25.6 million of natural resources bonds.

Morgan Stanley is senior manager and Fifth Third Securities Inc. is co-senior. Ten additional firms are on the underwriting team. Calfee, Halter & Griswold LLP and Wilkerson & Associates Co. are bond counsel.

Public Financial Management Inc. is financial adviser.

Of the $416 million issue, $330 million of bonds are being refinanced as part of the budget-savings proposal.

The remaining $111 million of debt is being refunded to achieve general economic savings, according to the state’s assistant debt manager, Larry Scurlock.

“We expect to generate strong savings on a net present-value basis,” he said.

The general refunding bonds are all callable within the next two years, while the bonds refunded for the budget savings are all noncallable.

Ohio typically markets heavily to retail buyers, and Scurlock said it “is not unreasonable” to assume that up to 20% of the week’s offering would be snapped up by individual investors.

Looking ahead, the Ohio Building Authority expects to come to market the week of Aug. 22 to price the remaining $110 million of bonds that make up the $440 million refinancing included in the budget.

Morgan Stanley is lead manager on that deal, an OBA official said. RBC Capital Markets and Wells Fargo Securities are co-managers. Bond counsel is Benesch, Friedlander, Coplan & Aronoff LLP. Prism Municipal Advisors LLC is the authority’s financial adviser.

Ohio has $9.7 billion of outstanding debt.

Ahead of the sale, Moody’s Investors Service and Fitch Ratings affirmed their equivalent Aa1 and AA-plus ratings on the state’s GO debt.

Moody’s maintains a negative outlook on the state. Fitch’s outlook is stable.

Standard & Poor’s rates Ohio’s credit AA-plus with a negative outlook.

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