Title
Resolution Authorizing the Execution of Gainesville Regional Utilities Financial Transactions (B)
**This item was presented to the UAB on October 10, 2019.**
Explanation
Taxable and tax-exempt rates have dropped to historic lows. These rates and the compression between the two yield curves is offering unprecedented opportunities for municipal issuers. Working with its independent financial advisor, GRU’s staff has identified a range of potential financial transactions for consideration in the upcoming months which, based on these market conditions, may allow the utility to
· Achieve current savings or lock in future savings
· Reduce debt portfolio risk
· Reduce leverage ratios
Staff’s intent is to describe and discuss the scope of each transaction with the City Commission and request that the Commission provide authorization to the General Manager or his designee to execute the transactions within prescribed parameters and timeframes to expeditiously take advantage of these changing market conditions. This City Commission authorization will provide staff the flexibility to execute transactions in a timely fashion, thereby contributing to GRU’s ability to deliver the $38.3 million budgeted transfer to the General Fund.
Following are the potential transactions, execution parameters and timeframes.
AMEND EXISTING SWAP AGREEMENTS
(1) 2017 Series B Swap Amendment:
In 2017, as part of the DHR acquisition transaction, GRU entered into a 27 year $105 million swap with Goldman Sachs. The purpose of this swap was to hedge a portion of the variable interest rate debt issued to acquire the plant to a fixed rate, as well as to achieve additional savings compared to issuing more fixed rate debt. This swap included a right for GRU to terminate the swap on and after year 10 without cost, similar to the redemption rights of the fixed rate bonds issued for the acquisition. GRU is requesting authorization to negotiate an approximate seven year extension of the termination ...
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