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TO: |
Board of Trustees |
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THROUGH: |
Jay Fox, Executive Director |
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FROM: |
Troy Bingham, Comptroller |
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PRESENTER(S): |
Troy Bingham, Comptroller |
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Brian Baker, Zion Public Finance |
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TITLE:
title
Bond Tender of Certain Taxable and Tax-Exempt Debt to Produce Debt Service Savings
end
AGENDA ITEM TYPE:
Discussion
RECOMMENDATION:
Authorizing staff to consult the Local Advisory Council and State Finance Review Commission about “Tendering” Outstanding Taxable and Tax-Exempt UTA Sales Tax Bonds for Savings.
BACKGROUND:
A bond tender is an offer by UTA to purchase bonds from investors that are currently not callable and are currently worth less than other higher interest rate investments. Tendered bonds from the 2019B, 2020B and 2016 series would be purchased with the proceeds of a 2023 tax-exempt bond issue. In a bond tender, UTA would invite existing bondholders to “tender” their bonds at specified prices determined by UTA, its Municipal Advisor, and its Dealer-Manager. Estimating a tender with a 30% pro-rata success rate (meaning acceptance by the bond holder) would mean nearly $78 million in refunding bonds, with present value savings of $8.7 million.
State statutes governing UTA’s bond refunding require several steps. The initial discussions for this bond refunding starts with the Board of Trustees. If recommended by the Trustees, the proposal will proceed to the May 31st Local Advisory Council meeting for consultation, and ultimately to a State Finance Review Commission meeting. If these bodies concur with the trending, the Board will have to act on a resolution at a future meeting of the Board of Trustees where they would set terms of the potential tendering and authorize financial agents to carry out the process. Staff will then start working with Zions Public Finance (the municipal advisor), Gilmore Bell (bond counsel), and UTA’s underwriters to solicit current bond holders.
DISCUSSION:
UTA’s Municipal Advisor from Zion Public Finance will present the latest forecast for the tendering with the possible net present value savings and speculated interest rates in the market at the time of new tax-exempt bond issue.
ALTERNATIVES:
This proposal is subject to ideal conditions in market and some of UTA’s bond investors may be willing to tender bonds, while others, like insurance companies who like to hold bonds to maturity, are unlikely to participate. If the conditions are not right in the market the tendering might be put on hold or cancelled.
FISCAL IMPACT:
Desired targets would be 5% net present value savings and at least $5,000,000.
ATTACHMENTS:
None