Title
2008 Series A Bonds and 2008 Series B Bonds (B)
This item is related to financing for costs of acquisition and construction.
Explanation
In October 2006, the City Commission authorized the Utility to enter into certain "floating-to-fixed" interest rate swaps in order to "lock-in" interest rates on $90,000,000 of new money Bonds expected to be issued in February 2008. In October 2006, the Utility entered into swaps totaling $90,000,000 with Bear Stearns Financial Products (BSFP) and JPMorgan Chase Bank (JPMorgan).
In November 2007, the City Commission authorized, among other things, (1) the financing of up to $205 million of new money for payment of Costs of Acquisition and Construction (capital projects) through the issuance of fixed-rate bonds; and (2) approved the selection of Goldman Sachs as Senior Manager for the bonds and authorized the appointment of additional Co-Managers if doing so would enhance the distribution of the bonds.
After the approval was received, GRU staff and our financial advisor determined that under current market conditions, in order for GRU to achieve the lowest all-in interest rate, it would be preferable to issue variable-rate bonds that are converted synthetically to a fixed rate through the use of the two existing "floating-to-fixed" interest rate swaps with BSFP and JPMorgan for $90 million of the new money for payment of Costs of Acquisition and Construction previously authorized. On January 14, 2008, the City Commission authorized the issuance of such synthetically fixed variable-rate bonds.
The issuance of the 2008 Series A and B Bonds for the purposes referred to above is scheduled to occur in mid-February. We recommend that the City Commission adopt the attached Authorizing Resolution which approves the sale of the 2008 Series A and B Bonds and, in order to afford Utilities staff the flexibility to determine when market conditions are best for pricing the fixed-rate 2008 Series A Bonds, delegates ce...
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