Atlanta on Friday closed on a private placement of $64.5 million of tax allocation district bonds for its ambitious BeltLine project, after the size of the offering was scaled back in recent weeks due to the liquidity crisis and market volatility.
Wachovia Bank and Sun Trust Bank equally split the BeltLine bonds, according to Douglass Selby, a partner with Hunton & Williams LLP, which served as co-bond counsel with Howell & Associates LLC on the offering.
“The deal that the city struck was for a Libor plus 3% rate index,” he said.
The bonds have an optional put feature that can be exercised on or after July 1, 2009, while other maturities run through December 2031. The bonds were unrated.
In August, the Atlanta City Council approved issuing up to $120 million for the BeltLine project, but the amount was reduced in the weeks leading up to the sale as the new-issue market recoiled due to market turbulence.
“The thinking is this is an interim financing until the market settles down,” Selby said.
Richard Lutch, director of finance for Atlanta BeltLine Inc., anticipates that the city will return to the market to refinance the bonds and sell the remainder of the authorized debt when market conditions improve.
“We’re monitoring the marketplace for the best time to go back out,” he said.
Proceeds from BeltLine bond sales will be used to convert 22 miles of abandoned railroads around Atlanta into a light-rail system, acquire 1,300 acres of new park space, reclaim up to 1,100 acres of brownfields, and finance an affordable housing trust.
Meanwhile, officials for the project are seeking federal funding to make up for the shortfall in bond proceeds. In addition, the BeltLine Partnership has raised $30 million of its goal of $60 million for the project.
With 96% of precincts statewide reporting, Georgia voters approved a referendum allowing school district money to be used to back tax allocation bonds. The decision would not affect the privately placed BeltLine bonds but would affect whether future bonds will be backed by school dollars as well as county and city funds, Selby said.
Overall, officials were pleased with the private placement, despite the reduction in size.
“We really appreciate how the two banks stepped up to the plate to support the BeltLine and the city of Atlanta,” Lutch said.
