DALLAS — Arlington plans to price nearly $170 million of special-tax revenue bonds early next week, as officials continue to try and convert some variable-rate bonds into fixed-rate debt.
In July, the City Council said it wanted to refinance about half of the $325 million that’s been issued to fund the city’s share of the $1.1 billion stadium being built for the National Football League’s Dallas Cowboys.
But the continued market volatility of the past few months kept the deal on the shelf.
“We had permission to get the bonds sold in July but that’s about when the market went caddywumpus on us,” said Fiona Allen, deputy city manager for capital investment.
But “a sense of normalcy” appears to have come back to the market, she said, and officials expect to finally fix out the debt, which is secured through a voter-approved 0.5% citywide sales tax, a 2% hotel-occupancy tax, and a 5% car-rental tax.
The bonds were initially sold three years ago in variable-rate mode and insured by MBIA Insurance Corp. When the insurer lost its triple-A rating earlier this year, city officials sought to convert the debt to fixed rate. The city could’ve replaced the insurer on the bonds, but chose to convert it all to fixed rate despite increased costs to do so.
Public Financial Management Inc. is the financial adviser to the city and Vinson & Elkins LLP is bond counsel.
PFM managing director Marlin Mosby said there will be a retail order period Friday and the bonds will price Monday or Tuesday.
“Instead of refunding the bonds into another variable-rate deal, we decided to sell it all at fixed rates,” he said. “The market seems very good right now … rates appear to be very favorable.”
The debt will come in three tranches: $24.8 million of serial bonds maturing 2017 through 2020, a $85.2 million term bond maturing in 2027, and a $60 million term bond maturing in 2031.
Mosby said two of three tranches will be insured by triple-A rated Berkshire Hathaway Assurance Corp., and officials hold the option to also wrap the longest “super-sinker” term. A super-sinker bond usually has a long-term coupon but a short maturity.
The city entered two swap agreements when it first issued the debt in 2005 that end upon completion of the refinancing and will cost the city about $7 million in termination fees.
Depfa Bank Plc was the remarketing agent for the variable-rate bonds upon the initial issue, and the bank owns $146 million of the bonds that currently bear interest of about 5.65%.
Mosby said another reason the city wants to get this refunding sold is to “not leave Depfa holding that chunk of bonds.”
The interest rates of roughly $18 million of other Series 2005B bonds not held by the bank continue to reset weekly and are currently about 7.75%.
Fitch Ratings and Standard & Poor’s both rate the special-tax bonds issued for the stadium at A. Moody’s Investors Service rates the bonds at A2.
Analysts said debt service is projected to rise slightly upon conversion of the debt, but modest revenue growth should shorten the maturity schedule and additional revenue from annual rental payments and naming rights to the stadium also should bolster reserves available for bond repayment.
The city, which sits between Dallas and Fort Worth, is currently improving numerous right-of-way projects around Interstate 30 in the northern part of the city near the stadium.
The as-yet-unnamed stadium is two-thirds complete and remains on schedule to open in August. The Cowboys start playing there next year and Super Bowl XLV will be played at the stadium in February 2011.
Earlier this month, Arlington voters approved $140.8 million of bonds in five propositions for improvements to roads and sidewalks, upgrades to fire stations, a new roof on the convention center, and other projects.
