Title
Refunding of Utilities System Revenue Bonds, 1993 Series A & B and 1996 Series A, Other Financing Items (B)
Explanation
In December 2002 the City Commission authorized the issuance of up to $100 million of new money revenue bonds for payment of Costs of Acquisition and Construction (capital projects). That transaction was completed in March 2003 with the issuance of the Utilities System Revenue Bonds, 2003 Series A and 2003 Series B totaling $40.625 million.
Also in December 2002 the City Commission authorized the refunding of the 1993 Series A & B Bonds on either a fixed-rate or synthetic fixed-rate basis, at a time and in a manner deemed prudent by staff and GRU's Financial Advisor (Morgan Stanley & Co. Inc.) prior to the first call date of those Bonds on October 1, 2003. In February 2003, based on advice of GRU's Financial Advisor and staff's belief that rates might go up, all parties determined that it was prudent to proceed with a competitive bid for an interest rate swap to lock in the rates for the refunding bonds, then scheduled to be issued in July 2003. Based on a competitive bid, GRU entered into an interest rate swap transaction with JPMorgan Chase Bank, which locked in substantial savings of almost $7 million.
Since that time, with the assistance of Morgan Stanley, our Financial Advisor, we have continued monitoring market conditions in relation to the refunding. Market conditions have continued to change with interest rates dropping to unprecedented levels. During this time, the firm of Morgan Keegan & Company, Inc. began analyzing the swap and the potential benefits of terminating the swap. Morgan Keegan then approached GRU with a comprehensive analysis showing the benefits of terminating the swap, making the swap termination payment required under the agreement and entering into a fixed-rate refunding, which could result in additional savings. Their analysis was reviewed by GRU staff, verified by Morgan Stanley, and confirme...
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