Title
Resolution Authorizing the Refunding of a Portion of the 2017 Series B Bonds through the Issuance of $105,000,000 in Variable Rate Utilities System Revenue Bonds, 2020 Series B (B)
**This item was presented to the UAB on 10/8/20.**
Explanation
As part of the financing to acquire the DHR facility in 2017, GRU issued $265 million in variable rate debt in the form of two direct purchase agreements - $150,000,000 of 2017 Series B Bonds with Wells Fargo and $115,000,000 in 2017 Series C Bonds with Bank of America.
Both of these direct purchase agreements have mandatory tender dates of November 7, 2020. This means that GRU must make a determination as to what financing options are preferable for the renewal of this variable rate debt. There are two primary options available to redeem this debt. One would be to issue fixed rate debt and terminate the swaps or allocate them to other variable rate debt. The second would involve maintaining variable rate debt with the following choices: 1) renew the existing direct purchase agreements; 2) issue new floating rate notes or other short term variable rate obligations, or; 3) issue variable rate demand bonds supported by a credit facility.
Fixed rate options: Both of these variable rate issues are synthetically fixed through swaps, therefore issuance of fixed rate debt to redeem the issues is not an economically viable option.
Variable Rate Options: Staff came to the City Commission in July with an information item describing our need to undertake some price discovery efforts to determine the most efficient and effective alternative for executing this transaction. Based on our review, together with our financial advisor and bond counsel we determined that the following structure will result in the optimal outcome for the utility:
Renewal and reissuance of the $115,000,000 direct placement with Bank of America on the 2017 Series C Bonds
Refunding $105,000,000 through issuance of a $105,000,000 2020 Series B Bonds direct ...
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