Louisiana Tobacco Settlement Financing Corp. trustees gave swift approval Tuesday to the controversial refinancing of up to $720 million of outstanding tobacco settlement revenue bonds.
The negotiated deal 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.
The structure drew the ire of Treasurer John N. Kennedy, who advocated a long-term strategy focusing on lower level payments on the current term of the bonds, or paying off the bonds early.
The sole dissenting vote came from Jim Napper, executive counsel at the Treasurer’s Office and Kennedy’s representative on the tobacco settlement board.
“We oppose this deal because of the reasons already cited by the Treasurer,” Napper said. “We are not against the restructuring, but we have a good-faith belief that it should have a different structure.”
The short-term structure was approved by the State Bond Commission at a special session June 6 with Kennedy as the lone hold-out in a 12-1 vote.
Citi is the senior bookrunner with Jefferies & Co. as co-senior manager.
Co-managers include Bank of America Merrill Lynch, Raymond James, Stephens Inc., Southwest Securities, Williams Capital Group, and Siebert Brandford Shank and Co.
Public Resources Advisory Group is financial advisor to the tobacco finance panel. Foley & Judell and Hawkins Delafield & Wood are co-bond counsel.
In 2001, Louisiana securitized 60% of its payments under the 1998 Master Settlement Agreement with major tobacco companies, and issued $1.2 billion of taxable and tax-exempt bonds.
Savings from the refunding are estimated at $67.2 million in fiscal 2014, $57.3 million in 2015 and $18.3 million in 2016.