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Sweet Deal for Everglades

BRADENTON, Fla. - The South Florida Water Management District expects to issue $1.7 billion of certificates of participation in a single sale before November to buy a key piece of land to help restore the Florida Everglades.

The district is refocusing its efforts from a previous environmental land acquisition program called Acceler8 in order to buy U.S. Sugar Corp.'s sugar- and citrus-producing farmlands - a buyout that shocked many in the sugar industry when it was announced on Tuesday by state officials.

Proceeds from the largest COP sale ever will be combined with $50 million in cash from the district's capital reserves for the expected $1.75 billion purchase price of 187,000 acres comprising U.S. Sugar's holdings, bringing a land mass as large as New York City into the massive Everglades restoration effort.

A nonbinding statement of principles guiding the proposed purchase was ceremonially signed by Gov. Charlie Crist, Water Management District and state Department of Environmental Protection officials, and U.S. Sugar president Robert Buker on Tuesday.

The agreement states that U.S. Sugar and the water management district will agree to the sale for $1.75 billion, subject to appraisals that still must be done.

The sale includes land in Palm Beach, Hendry, Glades, and Gilchrist counties as well as a sugar mill and refinery, an office building, a citrus processing plant, a railroad and rolling stock, and other fixtures and buildings. Under the sale agreement, U.S. Sugar would continue its operations until the sixth anniversary after the closing.

The district, state officials, and U.S. Sugar expect to negotiate a purchase agreement in the next 75 days and to close on the sale by Nov. 30.

While a rough plan of finance is envisioned, attention now turns toward fine-tuning the finance plan, including nailing down the final purchase price, structuring the deal, scheduling meetings with rating agencies, and assessing what insurance may be available, said Paul Dumars, chief financial officer for the district.

"We've got a lot of work to do," Dumars said yesterday.

That work will include modifying existing master lease agreements and preparing legal documents for the water district's governing board to approve.

While the current plan is to issue $1.7 billion of COPs, the deal will include provisions to buy down some of the debt once U.S. Sugar has vacated the land. The debt will be paid down with the sale of assets not needed by the district, and is designed to match the long-term affordability its budget, Dumars said.

In late 2006, the Water Management District broke ground in the municipal market when it became the first issuer to finance environmental restoration projects using COPs. The agency sold $546 million of the tax-exempt certificates for Acceler8 restoration efforts, which at that time was Florida's largest COP deal ever.

The 2006 COPs were rated AA-minus by Fitch Ratings, Aa3 by Moody's Investors Service, and AA-plus by Standard & Poor's. Citi headed up a syndicate of 11 underwriters on the sale.

Under the original plan, proceeds from several tranches of debt were expected to accelerate eight specific projects designed to help restore the unique and historic Florida Everglades and its coastal estuaries, including habitat for rare wildlife and plants, as well as to provide flood control and protect fresh water resources.

However, other than the original sale in 2006 no other tranches were sold under the Acceler8 program by the nonprofit South Florida Water Management District Leasing Corp., which was established by the district to sell the debt in 2006 and will be used to sell the COPs later this year.

The U.S. Sugar buyout will allow the water district to refocus its efforts and replace some of the Acceler8 projects.

"This is still the Everglades and natural system restoration, and the essentiality never goes away," Dumars said. "The ability to acquire these lands just enhances the whole effort and eliminates the need for some projects. There will be no need for some reservoirs because this [U.S. Sugar] project will have a huge, huge reservoir and expanded water-treatment areas."

The U.S. Sugar land also will open up a contiguous connection from Lake Okeechobee down to the Everglades, something that has not been possible until now, according to Dumars.

"This project is the jewel and the diamond of Everglades restoration - it was the missing piece between Lake Okeechobee and water preservation areas leading into the Everglades," he said.

Farming will continue in other parts of South Florida, but the land purchase eventually will eliminate a significant source of harmful nutrients flowing into the Everglades.

The $1.7 billion offering later this year would be the largest COP deal ever sold, according to Thomson Reuters data.

The underwriting team for the upcoming issue is still being assembled due to contraction in the industry, Dumars said.

Public Financial Management Inc. is the water district's financial adviser. Bryant Miller Olive PA is bond counsel and Nabors, Giblin & Nickerson PA is disclosure counsel.

U.S. Sugar has 1,700 employees, many of whom live in some of Florida's most rural counties that are often hard hit during economic downturns. The company said it will use the six years it continues to operate its farms as a "transition period" and will provide severance compensation for employees. The governor has asked state economic development and workforce offices to help develop an economic transition plan for the affected counties.

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