CHICAGO -- Ohio Thursday will hold a competitive sale for $267 million of general obligation refunding bonds, following the deal in two weeks with $135 million of new-money borrowing.
Thursday’s sale will refund GO school bonds and higher education bonds that were originally issued in 2005 and 2006.
“These are economic refunding bonds that have call dates in 2015,” said Larry Scurlock, the state’s deputy debt director. “It’s a straightforward advance refunding.”
Scurlock said the state expects “strong” net present value savings but declined to name a figure.
Fitch Ratings and Standard & Poor’s rate the debt AA-plus and Moody’s Investors Service rates it Aa1, in line with the Buckeye State’s GO rating.
The state had planned to sell the refunding bonds in late January, but then decided to hold the deal until mid-February to give the market time to digest Ohio Gov. John Kasich’s two-year budget proposal.
Kasich unveiled the $130 billion two-year budget Feb. 4. The spending plan proposes a $1.5 billion bond issue that would feature a new credit pledging future revenues from the Ohio Turnpike. The state had tentatively expected to head to market with the turnpike bonds in the third quarter, but Kasich said he would push lawmakers to approve the deal faster to take advantage of current low rates.
Except for the turnpike proposal, the budget proposes no new bonding authority that’s not included in the state’s current $1.78 billion two-year capital budget, and does not rely on restructuring or refunding of existing debt.
Thursday’s transaction includes two series: $198.7 million of common schools bonds that mature from 2016 through 2025, and $68.2 million of higher education bonds that mature from 2017 through 2024.
The Ohio Public Facilities Commission is issuing the debt. Roetzel & Andress LPA is bond counsel. Public Financial Management Inc. is financial advisor.
It’s the OPFC’s only refunding deal in the near future, Scurlock said.
A piece of Ohio GO common school bonds maturing in 2023 were yielding 2.35% in recent trading, according to the Municipal Securities Rulemaking Board’s EMMA website.
The Ohio Treasurer, meanwhile, is set to enter the market Feb. 26 with a mix of new money and refunding bonds. The borrowing will be divided into five series of special obligation bonds.
A $25 million series will be used to finance new mental health projects, and $16 million will be used to refund outstanding mental health debt. Another $18 million will be used for cultural facilities and $21 million will refund outstanding cultural facilities debt. A $50 million series will refund bonds originally issued for prison projects.
The debt is expected to be rated double-A, one notch below the state’s GO rating.
Ohio also plans to sell $100 million of tax-exempt bonds in April that will finance the Third Frontier program, which raises money for technology businesses across the state. The debt will be sold competitively.
Ohio has $7.8 billion of outstanding GO debt.