BRADENTON, Fla. - The South Florida Water Management District this week is expected to file a complaint in circuit court in Palm Beach County seeking validation of up to $2.2 billion of debt to buy a key piece of land vital to the restoration of the Florida Everglades.
The district's bond counsel, Bryant Miller Olive PA, will seek to validate up to $2.2 billion of certificates of participation to provide funding to purchase 187,000 acres of sugar- and citrus-producing farmland from U.S. Sugar Corp., a key acquisition in restoration efforts of the Everglades, also known as the River of Grass.
When the deal was first announced in late June, officials estimated the price tag at around $1.75 billion. Negotiations are continuing to firm up the final cost, which could be announced next month, said the district's chief financial officer, Paul Dumars.
Dumars said the bond resolution makes up to $2.2 billion of COP capacity available and provides flexibility for other capital needs.
In addition to authorizing the COP validation, the Water Management District's board last week also amended its debt capacity. The board increased its self-imposed ratio of debt to ad valorem and other available revenues to 30% from 20%. Without that hike, the district could not have issued $1.75 billion of COPs.
"We did that merely to negotiate in good faith," Dumars said.
The instability of the credit markets also came up at last week's meetings, along with the fact that at least two senior underwriting firms are gone from the district's pool - UBS Securities LLC, which no longer underwrites negotiated sales, and Lehman Brothers, which filed for bankruptcy.
Dumars said questions also remain about Merrill Lynch & Co., which is being purchased by Bank of America, and Morgan Stanley, which is becoming a bank holding company. Others on the district's senior financing team are Citi and Goldman, Sachs & Co.
"We can't say what kind of impact that will have on our ability to sell the COPs," Dumars said. "We've talked about it with our board, and probably working with our financial adviser we'll make a decision as to whether or not we need to add to it or make any other adjustments."
Other firms that remain in the syndicate are Estrada Hinojosa & Co., Loop Capital Markets, M.R. Beal & Co., Raymond James & Associates Inc., and RBC Capital Markets Inc.
Public Financial Management Inc. is the district's financial adviser.
Dumars said he anticipates achieving double-A ratings for the U.S. Sugar deal, just as the district received for a previous COP deal. But bond insurance most likely will not be used.
"Overall, our double-A ratings give us some degree of confidence that we could do the financing without traditional bond insurance as credit enhancement," he said. "If the insurance industry had not suffered what it's going through, we would probably insure this deal."
The district's finance team will seek ratings for the U.S. Sugar deal financing most likely in the first quarter of next year, after the final price is negotiated and the bonds have been validated.
The district covers 16 counties in South Florida. It manages and protects water resources in the region, with focus on water quality, flood control, natural systems, and drinking water supply. The district is a partner in the state-federal comprehensive environmental restoration program for the Florida Everglades.
