The Louisiana Tobacco Settlement Financing Corp. has given preliminary approval to securitizing the remaining 40% of the state's revenue from the Master Settlement Agreement with tobacco companies.
The deal, in which $875 million in bonds would be issued to raise funds for the state's higher education scholarship program, still must be approved by other agencies as well as the Legislature, corporation board members were told March 17.
The Louisiana Legislature's annual session begins April 13 and ends June 11.
Over the objection of State Treasurer John Kennedy, the corporation board voted 12-1 to move forward with the new-money transaction, and to retain the same finance professionals that worked on Louisiana's $659.7 million tobacco bond refunding in 2013.
The professionals on the 2013 deal were Public Resources Advisory Group Inc. as financial advisor, Citi as senior underwriter, and Foley & Judell LLP and Hawkins Delafield & Wood LLP as co-bond counsel.
"The fees on a transaction like this are huge," said Kennedy, who argued that the state might get a better deal on issuance costs if it sent out requests for proposals.
However, staff members said there wasn't enough time to go through a lengthy RFP process, and that it was necessary to have the finance professionals on board to explain the transaction as it goes through approval procedures.
The negotiated rates and contracts with the finance team members will be brought back to the corporation board for approval at a future meeting.
Kennedy also complained that the corporation had not done enough vetting of tobacco consumption and related issues to determine whether to securitize the remainder of the state's settlement proceeds.
"This will be vetted many, many times between now and June 11," said Rep. Chuck Kleckley, R-Lake Charles, who is also speaker of the House.
The new securitization is expected to go before the State Bond Commission April 16, and the Joint Legislative Committee on the Budget May 20.
A bill authorizing the deal is expected to be filed and assessed in the legislative process. If lawmakers approve the issuance, the bonds likely would be sold in June.
Louisiana securitized 60% of its tobacco settlement revenue in 2001 with the sale of $1.2 billion in bonds.