Colorado Springs is remarketing $66 million of variable-rate utility refunding revenue bonds with a new liquidity provider, effective Tuesday.
Royal Bank of Canada will provide a standby purchase agreement, replacing the Bank of Nova Scotia. The bonds were issued as Series 2009C and were subject to mandatory tender Friday.
The SBPA provides for the payment of the principal plus 35 days of interest at the maximum interest rate of 12% for tendered bonds during the weekly, monthly and quarterly rate modes in the event that remarketing proceeds are insufficient to pay the purchase price following optional or mandatory tender. The substitute SBPA will expire on Sept. 19, 2014.
Colorado Springs, which operates its public electric and water utilities, carries ratings of AA from Standard & Poor’s and Fitch Ratings and Aa2 from Moody’s Investors Service. Moody’s imposed a negative outlook on the city’s combined utility revenue bonds in August.
“Moody’s expects the rating outlook could turn stable should utilities implement its 2012 rate increase, maintain its sound financial metrics, and maintain consistent application of its new general fund transfer policy,” analysts wrote. “The negative outlook had recognized the increased pressure from the significant rate increases to fund the utility’s $1.81 billion infrastructure improvement program over the 2012-2016 time frame.”