Arlington to Refinance ARS From Cowboy Deal

DALLAS - Arlington, Tex., will refinance $153 million of auction-rate securities issued in 2005 as part of a three-tranche deal for the Dallas Cowboys stadium after interest rates spiked in the wake of bond insurance downgrades.

The Series B auction-rate securities and two series of fixed-rated bonds were insured by MBIA Insurance Corp.

The refinancing will hit the city with $4.7 million in additional finance costs, but save money in the long-term after rates for the ARS soared to as high as 9% after the downgrades. That was up from levels of 3% to 4% since the debt was issued in 2005, city officials said. The city believes it can refinance at an average interest rate of 5%.

Also issued in 2005 were $137 million of Series A fixed-rate stadium bonds and $23 million of Series C fixed-rate stadium bonds.

MBIA lost its triple-A rating after getting caught in the downdraft of the subprime mortgage market. The MBIA ratings for insured bonds now stand at AA with a negative outlook from Standard & Poor's, Aa2 with a negative outlook from Moody's Investors Service.Fitch Ratings withdrew its rating late last month.

The downgrades for bond insurers have roiled the muni market as hundreds of outstanding bond issues have faced higher interest costs as a result.

Arlington's refinancing of Series B bonds could come as early as August, Arlington officials learned this week.

The City Council voted Tuesday to refinance the ARS that were said to have saved about $3 million over comparable fixed-rate debt.

The bonds are backed by a sales tax approved by Arlington voters in 2004 to build the $1.1 billion stadium that will host the Cowboys starting in 2009 and the Super Bowl in 2011.

Arlington is obligated for $325 million of the stadium's cost and by Sept. 30 expects to have $86 million in sales tax revenue collected since 2004. The city has paid about $19 million in interest and fees on the debt.

The city, halfway between Dallas and Fort Worth, is also planning to ask voters for a $144 million bond package for street projects near the stadium. The city decided against putting a bond package before voters in May, opting to wait until November so the question would coincide with the presidential election and allow more time to review the potential projects. The city council must call for the election by August to have it before voters in November.

With an estimated population of 332,969, Arlington in May won a general obligation upgrade from Standard & Poor's to AA-plus from AA. Moody's rates the city's GO debt at Aa2, while Fitch maintains a AA.

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