BRADENTON, Fla. — Broward County, Fla., on Tuesday begins a two-day pricing to current refund approximately $170.5 million of professional sports facilities revenue bonds in order to terminate swaptions on the debt.
Proceeds of the bonds will refund tax-exempt and taxable bonds sold in 1996 to build a 21,000-seat, multipurpose arena in Sunrise primarily for the National Hockey League’s Florida Panthers and pay swap termination fees totaling $15.7 million.
Merrill Lynch & Co. is book-runner on the deal, which consists of $120.5 million of tax-exempt refunding bonds, Series 2006A, and $50 million of taxable refunding bonds, Series 2006B.
Ambac Assurance Corp. will insure both series, with maturities between 2007 and 2028. The bonds will be secured by tourist taxes on hotels, state sales tax rebate funds, and a portion of the net revenues from the arena as well as a secondary pledge of non-ad valorem revenue.
In 2004, the county entered into swaptions to help the financially ailing Panthers.
“The arena swaption transaction provided an upfront payment of $17.23 million that was shared between the Florida Panthers and the county,” Broward’s acting chief financial officer, Matthew Lalla, said in a report to county commissioners concerning this week’s refunding.
The hockey team received about 60% of the upfront payment and used the money to help pay debt service on the arena, which the team operates.
Earlier this year, the swaption counterparties — Bear Stearns Financial Products Inc., Goldman Sachs Mitsui Marine Derivatives Products LP, and Merrill Lynch Capital Services Inc. — exercised their option to require the county to issue variable-rate debt and enter into an interest rate swap, Lalla’s report said.
To eliminate the basis, liquidity, and counterparty risks associated with continuing the swaps and issuing variable-rate debt, county commissioners voted to exercise their option to pay a termination fee and sell fixed-rate debt to refund the bonds.
The 2006 bonds will be priced to retail investors tomorrow and institutional investors on Wednesday, according to Merrill Lynch.
Due to market conditions this week, the county expects to receive $2 million or more in net present value savings over what is needed to make the swaption payment, Lalla said in an interview late Friday.
“From our point of view, a positive economic extraction is simply gravy on top of the economic benefit we received back in March of 2004 from the swaption premium we received at that point in time,” said Lalla.
Although excess from the refunding will be split with the Panthers, like the upfront swaption payment, Lalla said he anticipates the refunding will result in lower debt service payments over the life of the bonds without extending maturities.
Although rating reports on the deal were not available late Friday, Lalla said he received verbal ratings of AA-minus, A1, and A-plus from Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s.
Public Resources Advisory Group Inc. is the county’s financial adviser. Along with Merrill Lynch, other underwriters on the deal are Bear, Stearns & Co., Goldman, Sachs & Co., Loop Capital Markets LLC, Ramirez & Co., and Siebert Brandford Shank & Co.
Squire, Sanders & Dempsey LLP and Perry E. Thurston Jr. PA are co-bond counsel. Bryant Miller Olive and Steve E. Bullock PA are co-disclosure counsel.
Moskowitz, Mandell, Salim & Simowitz PA and John M. Milledge PA are co-underwriters’ counsel.
