CHARLESTON -- West Virginia made more than $800 million Thursday on the sale of its tobacco settlement bonds.
Gov. Joe Manchin said the sale was the state's largest bond issue ever. The proceeds will help be used to pay down debt and help secure state's teachers' pensions.
"Since 2005, working with a progressive Legislature led by Senate President Earl Ray Tomblin and House Speaker Rick Thompson, we have saved the people of West Virginia more than $2.5 billion and assured the pensions of our retired and active teachers," Manchin said in a press release. "The Legislature set the floor and a target for the proceeds of this securities issue at $800 million net, and we exceeded that target by more than $7 million.
"Using the advice of the Public Resources Advisory Group and continuing our commitment to 'Responsible Government,' we are extremely pleased at the success of this bond sale, which is another big step toward getting our financial house in order," the governor said.
The cost of the sale was less than the 1 percent allowed by the Legislature. The deal is the largest taxable tobacco securitization in the United States to date, according to officials from Citigroup, the lead bookrunning manager on the transaction.
The $807 million in proceeds is higher than the $524 million expected when the state considered tobacco securitization in 2002. Manchin's office said this sale, along with earlier advance payments to the teachers' and other retirement systems, will save the state about $2.5 billion.
"Amid challenging market conditions due to rising interest rates, it is remarkable that the state was able to accomplish its goal," James F. Haddon, managing director in the Municipal Securities Division at Citigroup, said in a press release from the governor's office.
The sale stems from West Virginia's part of a 1998 settlement with four major tobacco companies. By selling, the state gives up its right to future settlement payments, which will be paid to 46 states over the next 20 to 25 years.