ATLANTA -- A Kentucky judge has denied a request to bar the sale of a $280 million refunding bond issue planned by the state's turnpike authority, allowing the deal to move forward after a two-month delay.
The Kentucky Turnpike Authority will sell its bond issue next Tuesday through a syndicate led by Lazard Freres & Co., said Roger Peterman, the issuer's counsel. The decision followed an Aug. 13 ruling by the Franklin Circuit Court denying the request for the restraining order.
"Now that [the request for the restraining order] has been denied and cannot be appealed, we are proceeding with the sale," Mr. Peterman, a partner at Peck, Shaffer & Williams in Cincinnati, said Friday.
The motion had been filed by Noel D. Wilson, a retired Kentucky taxpayer, who claimed the bond issue was illegal because a 1990 lawsuit he had filed contesting the authority's right to sell lease-purchase debt is still pending.
According to Julius Rather, Mr. Wilson's lawyer, the request for the restraining order was denied after he told the court that his client would not pursue it.
"I became convinced that I would not be able to sustain my argument [against the turnpike authority] on this go-around," Mr. Rather said.
The Lexington, Ky., attorney said his client would probably have a better chance of convincing the court that turnpike debt is illegal in Kentucky by contesting a new-money offering than a refunding.
"I guess what it came down to was that I didn't want to waste any bullets shooting at rabbits when we're hunting for elephants," he said.
Though the effort to halt the refunding deal has ended, Mr. Rather said his client would challenge future Turnpike Authority issues. In particular, he said, Mr. Wilson will seek to halt sale of about $150 million of new-money bonds that the authority has planned in 1993.
The 1990 suit argues that the turnpike authority should be denied the right to sell lease-purchase debt without voter approval. The lawsuit also argues that the authority is not authorized to sell bonds to renovate existing highways.
Charles Cassis, who represented the state as litigator in the case before the Franklin Circuit Court, said the state will continue to fight any challenge to turnpike bond issues.
"The state has argued against Mr. Wilson's contentions [that the turnpike authority is illegal] in the past, and will do so in the future," said Mr. Cassis, who is a partner at Brown, Todd & Heyburn in Louisville, Ky.
According to Mr. Peterman, the upcoming bond issue will refund all of the authority's outstanding $31.5 million of 1987 Series A bonds and most of the outstanding $276.8 million of 1990 bonds on the 1996 call date.
In October 1990, completion of a $307.8 million issue of turnpike authority bonds was held in limbo for two weeks after the bonds had been priced, following the Franklin Circuit Court's decision to grant Mr. Wilson a temporary restraining order barring sale of the debt.
The authority could not close the bond issue until a state appeals court overturned the restraining order and the Kentucky Supreme Court declined to take a stand on the appeals court ruling.
Claire Cohen, an executive vice president at Fitch Investors Service, said that had the high court reimposed the restraining order holding up the refunding, it would have caused problems for other issuers in Kentucky besides the turnpike authority.
"This could have turned into a very big deal because most of Kentucky's debt is sold through a lease-purchase mechanism," she said.
On Friday, Fitch awarded the upcoming issue an A-plus rating. Moody's Investors Service and Standard & Poor's Corp. have not yet rated the borrowing.