CHICAGO — Ohio will price $25 million of federally taxable general obligation bonds Tuesday that will finance cash bonuses for Ohioans who are veterans of recent wars.
The bonds are rated in the high double-A category, based on Ohio’s GO rating.
The state considered postponing the deal amid market uncertainty tied to Standard & Poor’s late-Friday downgrade of U.S. debt. After meeting with their financial advisor and senior underwriter and noting the week’s light supply, officials said they chose to move forward with the sale.
“We do, like everybody else, have concerns,” said the state’s assistant debt manager, Larry Scurlock. “But what we’re seeing today is a real flight to quality, and though the market remains volatile we’re hopeful we can have a good pricing at attractive yields.”
The borrowing is the second under the Ohio Veterans Compensation Program. Ohioans in November 2009 approved the issuance of up to $200 million of GO bonds to finance the bonuses.
The state might not end up tapping the entire $200 million due to a lower-than-expected eligible number of veterans, Scurlock said.
Original projections estimated that 200,000 Ohio residents would be eligible for a bonus, according to bond documents.
The program awards bonuses to veterans who served in the Iraq, Afghanistan, or Persian Gulf wars. Qualifying veterans can receive $50 for each month of active service and $100 for each month of service in combat zones, up to a maximum of $1,500.
Families of deceased veterans are also eligible for the same bonuses.
The Ohio Public Facilities Commission is the issuer.
Fifth Third Securities Inc. is the senior manager. The Huntington Investment Co., RBC Capital Markets LLC, and Ramirez & Co. round out the team.
Ahead of the sale, Fitch Ratings and Standard & Poor’s affirmed their AA-plus with stable outlook ratings on the state’s GO debt. Moody’s Investors Service rated the bonds Aa1 with a negative outlook.
Public Financial Management Inc. is financial advisor. Dinsmore & Shohl LLP and Mann & Carducci Co. are bond counsel.
The bonds mature serially from 2012 through 2026.
The state priced $50 million of bonds for the same purpose last August. It saw interest rates ranging from 1% for the 2012 bonds to $4.9% for the 2025 bonds on the transaction.
A tranche of those bonds with a 2025 maturity were priced at 4.3% in recent trading, according to data provided by the Municipal Securities Rulemaking Board.
The Ohio Department of Veterans Services administers the program.
Ohio has $7.6 billion of outstanding GO bonds and another $2.4 billion of appropriation-backed debt.