Ohio Bbegins Process to Sell Tobacco Bonds

Source from:  Associated Press COLUMBUS 07/13/2007

Financial advisers sought to handle $5 billion deal. Proceeds to help seniors Ohio began the process Wednesday to pick financial advisers to handle the $5 billion sale of its share of the national tobacco lawsuit settlement whose proceeds will be used primarily to pay for property tax cuts for those 65 and older. The three-member committee charged with spelling out the details of the sale voted unanimously on its solicitation to advisers, then released the details to the Web. A series of national print advertisements was scheduled to begin running today, said state debt coordinator Kurt Kauffman. The Buckeye Tobacco Settlement Financing Authority anticipates it will receive about half a dozen proposals from advisers by Tuesday's deadline, said state treasurer and authority member Richard Cordray. He said the number of proposals will be so few because advisers will be prohibited from also handling the sale of the bonds. The authority plans to select advisers by the end of July. State budget director Pari Sabety said the request for proposals requires advisers to have experience with tobacco bond sales and sales of Ohio bonds, and looks favorably on companies with Ohio operations. The fees to be charged will be an important factor in determining which company wins the business, authority member Kent Markus said. Kauffman said fees in similar transactions have varied widely, from $80,000 in a $3 billion deal to $370,000 on a $500 million tobacco transaction. Cash-strapped states are increasingly selling their proceeds from the national settlement with cigarette companies to pay for state operations, particularly as smoking bans become more common around the country and jeopardize the future value of the funds. Collecting the settlement in 40 years of installments would have netted the state an estimated $18 billion. But a lump sum payout through a process called securitization will allow the state to sell the right to its future settlement payments to investors in return for an immediate influx of cash. The Ohio sale would be the largest of the 19 states to take a lump sum. California, New York and Michigan are among those that have already used payments to plug budget holes. Michigan and Wisconsin are in line to sell tobacco settlement proceeds around the same time as Ohio, but Sabety said because of the size of Ohio's transaction they are expected to plan their bond offerings around the date Ohio eventually announces. That date is expected to be in late October or early November. Enditem