DALLAS - Some $150 million of auction-rate debt sold in 2006 to finance performance facilities in the downtown Dallas Arts District will be refunded with proceeds from Thursday's negotiated sale of variable-rate bonds by the Dallas Performing Arts Cultural Facilities Corp.
The sale will consists of a $75.5 million tranche underwritten by Banc of America Securities LLC and a $75.5 million tranche underwritten by JPMorgan. The two underwriters will also serve as remarketing agents for the respective series, which are enhanced with separate letters of credit from Bank of America NA and JPMorgan Chase Bank NA.
The bonds are rated AA/A+1 by Standard & Poor's and Aaa/VMIG-1 by Moody's Investors Service, based on the banks providing the letters of credit.
Financial adviser is First Southwest Co. Co-bond counsels are Vinson & Elkins LLP and West & Associates LLP.
The cultural facilities corporation was formed in February 2006 by the city to serve as a conduit issuer for the Dallas Foundation for the Performing Arts Inc. The nonprofit corporation loaned the 2006 bond proceeds to the foundation, which used the funds as a bridge construction loan for new facilities within the district.
Randy Kurtz, interim chief financial officer for the Dallas Center for the Performing Arts, said the refunding was prompted by higher-than-expected debt service on the 2006 bonds, which were insured by MBIA Insurance Corp. The 2006 bonds were rated BBB-plus by Fitch Ratings and BBB-minus by Standard & Poor's.
"The auction-rate securities were insured by a monoline bond insurer, and due to the market's distaste for that style of enhancement it became apparent we needed to look for a more acceptable alternative," Kurtz said.
"It was strictly a debt-service issue," he said. "The cost was not viable. It was not a concern for the project, which is on time and on schedule."
The arts foundation will support the bonds with donations it receives from local individuals, corporations, foundations, and organizations.
The land for the Dallas Arts District was purchased by the city with $10 million of proceeds from a 1998 voter-approved bond issue. The city will lease the land to the arts foundation for $1,000 a year for 40 years, and provide at least $2.5 million a year for operating costs.
Dallas voters also approved $17.3 million of bonds for the district in 2003, and $38.2 million of bonds for a performance center in 2006. The Dallas Independent School District recently completed a $40 million high school for the performing arts adjacent to the Arts District.
The original cost estimate for the performing arts facilities was $275 million when the 2006 bonds were sold, but addition of a second parking garage and other amenities have pushed the total cost to $338 million. So far, about $188.5 million has been spent by the arts foundation on facilities within the district.
The Dallas Center for the Performing Arts will include a 2,300-seat opera house, a 600-seat theater for smaller productions, a large outdoor venue, and a 10-acre performance park that will connect the facilities. Two underground parking garages will accommodate up to 850 cars.
Several of the facilities are to be completed in March 2009, with the official opening in October 2009.
The arts foundation has raised more than $327 million of the $338 million total cost. More than 129 donors each pledged more than $1 million. The largest gift to date is $42 million.
