State close to tobacco bonds sale
State officials have reached a tentative agreement that plugs holes in bond documents outlining how a $1.2 billion tobacco bond sale should be conducted later this month.
Attorney General Richard Ieyoub said he has recommended new language that he believes protects the state from having to guarantee millions of dollars in annual payments to investors who buy the bonds.
A prospectus outlining the proposed sale will go out to potential investors today.
The state will collect an estimated $1.2 billion from the sale, which is now scheduled to take place the week of Oct. 29, a week later than originally planned.
State Treasurer John Kennedy said declining interest rates and other factors will reduce the funds the state will reap from the sale by $21.4 million initially. The take now will be $1,206,375,000, officials said.
Ieyoub said the new legal language makes the bond sale "air tight." He said it also protects the state from future lawsuits by bondholders if tobacco companies default on annual payments linked to the bonds.
The bonds, which will help fund education and health care in the state, are tied to a national case by Louisiana and many other states seeking payments from cigarette makers for the immense cost of treating tobacco-related illnesses.
Last week, Ieyoub said he was afraid a lawsuit filed in Lake Charles challenging legal fees in the national case could disrupt the flow of tobacco settlement payments and affect the pending $1.2 billion sale.
A new phrase inserted in bond documents states that the attorney general "canâ€™t predict the outcome of litigation with certainty," but he believes lawsuits and ethics complaints surrounding the national tobacco case are "without merit."
Two state court lawsuits and a proceeding before a Louisiana State Bar Association disciplinary board challenged the $575 million in legal fees paid to attorneys hired by Louisiana as part of the national tobacco settlement.
Ieyoubâ€™s office feared any one of the cases could disrupt the 3-year-old, $206 billion national tobacco settlement, causing bondholders to turn against the state to collect on the Oct. 29 tobacco bonds.
Ieyoub has long defended the $575 million in legal fees, some of which are going to Louisiana law firms that have supported Ieyoub politically.