Diane Chime,
Chief of Capital Markets
Buckeye Tobacco Settlement Financing Authority Completes $5.3 Billion Refinancing
Favorable Market Conditions attract 150 investors and over $50 billion in orders
(COLUMBUS, Ohio) – The Buckeye Tobacco Settlement Financing Authority (the Authority) closed on a $5.3 billion refinancing of the Tobacco Settlement Asset-Backed Bonds on Wednesday, March 4. The transaction went to market on February 25, 2020, taking advantage of incredibly favorable municipal bond market conditions.
The 2020 deal refinanced bonds originally issued in 2007 that securitized the State of Ohio’s annual payments received under the 1998 Tobacco Master Settlement Agreement with tobacco companies. The tobacco settlement bonds are special revenue obligations and are not at Ohio taxpayer or General Revenue Fund expense.
Earlier this year, the Authority approved the refinancing to decrease interest costs, create an opportunity for the State to receive future tobacco settlement payments, and prevent the 2007 bonds from a 2024 potential revenue shortfall. The transaction prompted more than 150 investors to submit over $50 billion in orders for the bonds. The bonds are structured to withstand significant future declines in tobacco consumption and to generate back-end savings for the State. Annual payments are projected to return to the State in 2052. The State did not contribute funds or provide credit support for the newly issued bonds; therefore, no risk was transferred to taxpayers.
The Buckeye Tobacco Settlement Authority is comprised of the Governor, the Director of the Office of Budget and Management (OBM), and the Treasurer of State. The Director of the Office of Budget and Management serves as the Secretary for the Authority.
“The Authority delivered on its objectives, lowering debt service costs and creating a more resilient structure. As a result, future tobacco settlement payments now have an opportunity to benefit Ohioans.” said OBM Director and BTSFA Secretary Kim Murnieks.
Jefferies and Citibank served as Joint-Lead Managers on the transaction.
The General Assembly created the Authority in 2007 for the sole purpose of exchanging Ohio’s annual revenue stream of tobacco settlement proceeds for a one-time upfront payment that financed the cost of improving facilities of Ohio’s K-12 schools and universities statewide. In turn, those annual payments are pledged to repay bond holders, and once repaid, the annual proceeds from the settlement will return to the State of Ohio.
News reporters and interested parties are encouraged to visit www.obm.ohio.gov for more information.
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