Issuers Intend to Issue Bonds to Redeem BABs

WASHINGTON -- Minnesota's Independent School District No. 832 is issuing tax-exempt bonds to refund Build America Bonds, and the City of Grand Forks, N.D. is close to doing the same.

The issuers disclosed the developments in documents posted on the Municipal Securities Rulemaking Board's EMMA system and in Grand Forks city agendas.

Build America Bonds, authorized as part of the federal stimulus program in the wake of the 2008 financial crisis, are taxable, direct-pay bonds that state and local governments could issue in 2009 and 2010. Issuers expected to receive subsidy payments from the federal government equal to 35% of their interest costs.

Following the federal spending cuts known as sequestration, the subsidy payments have been reduced since March 2013. The cuts to subsidy payments have triggered the extraordinary redemption provisions in the official statements for some issuers' BABs.

The Independent School District No. 832 -- headquartered in Mahtomedi, about 15 miles northeast of the Minneapolis-St. Paul metropolitan area - disclosed last week that it has "taken action" to redeem BABs it issued in 2010, after saying in an event notice in September that it has initiated proceedings that may result in such action.

The BABs were issued in the amount of $45 million, and their proceeds were to be used to finance the purchase of and improvements to school facilities. An underwriting syndicate managed by BMO Capital Markets GKST Inc. purchased the bonds. Springsted Inc. was the district's financial advisor and Dorsey & Whitney was bond counsel, according to bond documents.

The district priced $38.93 million of series 2014A tax-exempt general obligation school building refunding bonds Oct. 28. They are expected to be delivered on or near Nov. 13. A portion of the proceeds will current refund the outstanding BABs with maturities from 2019 to 2031.

The refunded maturities are expected to be called on Dec. 18. The refunding portion of the new issue "is being issued to insulate the district from potential future federal reimbursement reductions," according to the official statement.

BMO Capital Markets is underwriter of the refunding bonds, Springsted is municipal advisor and Dorsey & Whitney is bond counsel.

Grand Forks said in an event notice dated Oct. 21 that it started proceedings that may result in the redemption of sanitation reserve revenue bonds it issued as BABs in 2009.

It has already placed the refunding deal on the competitive calendar for Nov. 17.

On Oct. 20, the Grand Forks' city council authorized the sale of roughly $8 million of series 2014B sanitation reserve revenue refunding bonds to refund the BABs with maturities from 2015 through 2039.

Proceeds of the $9.04 million of BABs were to be used to finance the acquisition of land, the reconstruction of a road and the design and construction of a landfill. An underwriting syndicate managed by Robert W. Baird & Co. purchased the BABs, Springstead was the city's financial advisor and Dorsey & Whitney LLP was bond counsel, according to the official statement for the bonds.

Springstead is advising Grand Forks on the new deal.