HomeMy WebLinkAboutRDA BOND FINANCING 07-01-91RDA N0. S
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7-1-91
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DATE: JUNE 26, 1991 11
TO: WILLIAM A. HUSTON, CITY MANAGER
FROM: RONALD A. NAULT, DIRECTOR OF FINANCE
SUBJECT: STATUS OF 1991 RDA BOND FINANCING
RECOMMENDATION:
Receive and file.
DISCUSSION:
At its meeting on May 20, the Agency approved the preliminary
documents and authorized staff to proceed with the proposed $13.8
million bond issue. The Agency approved the preliminary documents
with the understanding that the documents may be modified subject
to comments made by the bond rating agencies and/or bond insurance
companies. In response to their comments the Agency's financial
advisors and staff are recommending some minor modifications to the
original documents that would first change the issue from a parity
issue, subject to terms and conditions of the original 1983 issue
and also, expand the permitted investments to include sureties.
This will allow us to purchase a Surety Bond, in essence an
insurance policy, to substitute for a cash bond reserve.
At the present time MBIA has declined to insure our issue without
these modifications. Without insurance Standard and Poors has
assigned a preliminary rating of BBB. (Bond insurance automatically
raises the rating to AAA). In today's market the interest spread
between AAA and BBB is about 84 basis points. On an issue of our
size this can mean approximately two (2) million dollars in
additional interest expense over the life of the Bonds.
Following a review of the conditions of MBIA and the alternatives,
staff feels that the changes are in the interest of the Agency and
will not create impediments to the Agency's flexibility regarding
any future debt issuance.
Ronald A. Nault
Director of Finance
RAN: 1s
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