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Louisiana Prices Delayed Tobacco Bond Refi

The refinancing of a tobacco settlement securitization that had been postponed during the recent market selloff finally priced Tuesday as a stable market restored issuers’ confidence to borrow in the primary market.

Against the backdrop of a much calmer market this week, Citi priced $662.9 million of Louisiana Tobacco Settlement Financing Corp. asset-backed refunding bonds.

"I would have waited because I think the market was settling down but I understand this is what happens when you get yourself in a position where you have to sell in order to balance your budget," said State Treasurer John Kennedy on the tobacco bond sale.

"I think they left money on the table. This is a classic example of why you shouldn't balance the budget with smoke and mirrors. Sometimes the mirror breaks, and when that happens, funding for important priorities goes up in smoke."

In a statement, Louisiana Commissioner of Administration Kristy Nichols said Citi believed entering the market now was the best option and allowed investors to focus on the sale ahead of a growing new-issue municipal bond calendar in the coming weeks that may compete for attention. The corporation priced ahead of Friday's economic release on employment and the risk of an unfavorable reaction in the bond market.

Yields ranged from 1.27% with a 5% coupon in 2016 to 5.30% with a 5.25% coupon in 2035. Bonds maturing between 2024 and 2035 are callable at par between 2015 and 2023.

Yields were lowered as much as five basis points from the premarketing wire released Monday on bonds maturing inside 10 years and in 2035. Yields on bonds maturing between 2024 and 2027 were raised 10 basis points.

The refunding bonds are rated BBB-plus by Fitch Ratings. Bonds maturing between 2016 and 2023 are rated A by Standard & Poor’s and bonds maturing between 2024 and 2033 are rated A-minus by S&P. Bonds maturing in 2035 were given a BBB-plus rating by S&P.

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