DALLAS — The New Orleans City Council gave preliminary approval Thursday to two debt refunding proposals that could total $370 million if the market cooperates.

The city hopes to refund up to $200 million of taxable bonds to lower the current 9.95% interest rate on $115.8 million of outstanding taxable pension debt issued in 2000, and avoid a $115 million balloon payment on the bonds due in March 2013.

In a separate issue, New Orleans would also refund $170 million of general obligation bonds issued in 1998 and 2004 for street repair projects.

The sales schedule calls for the GO refunding to take place in July with the taxable refunding in August.

The pension obligation bonds are rated Baa3 by Moody’s Investors Service and BBB-minus by Standard & Poor’s.

The city’s GO debt is rated A3 by Moody’s and A-minus by Fitch Ratings.

Citigroup is the lead underwriter on the GO refunding. Co-underwriters include Raymond James & Associates Inc., Morgan Keegan & Co., Bank of America Merrill Lynch, Loop Capital Markets LLC and Stephens Inc.

The GO refunding is expected to provide $20 million of net present-value and cash-flow savings of $26 million.

Cantrell Wright and Foley & Judell LLP are co-counsels for the GO refunding.

Foley & Judell and Auzenne & Associates LLC are co-bond counsel for the taxable refunding. Underwriters have not been selected.

Andy Kopplin, the city’s chief administrative officer, said the taxable pension bonds were issued in 2000 as variable-rate debt with a synthetic fixed rate of 6.95%. Proceeds were invested in the stock market to shore up the underfunded pension fund for city firefighters.

The bonds were transferred to JPMorgan Chase as bank notes in March 2008 with the ratings downgrade of Ambac Assurance Co., which had insured the debt.

Kopplin said JPMorgan could have charged the city an interest rate of 11.95% on the pension debt, but set the rate at 9.95% in light of New Orleans’ post-hurricane financial position.

The bank agreed to hold the bonds for only five years, Kopplin said, and without the refunding the city will face a $115 million payment next March.

The refunded debt will be secured by an undedicated portion of the city’s property tax, Kopplin said, which will reassure bond buyers.

“This will change a very, very unattractive credit of the city of New Orleans, which is dragging down our GO bond rating, into a secured credit,” he said. “These will be very conventional, long-term fixed bonds, very traditional.”

The new bonds will not extend the scheduled 2030 maturity of the pension debt, Kopplin said. The proceeds will also pay a swap termination fee and refund $16 million of taxable debt issued last year for cash-flow needs and $26.5 million of debt issued in 2004 to pay legal judgments.

Council President Jacquelyn Brechtel Clarkson said refunding the pension debt will help the city move forward.

“We’re going to cover a multitude of sins, which weren’t necessarily sins,” she said. “We’re finally beginning to reconcile the numerous times in this city’s history when we were faced with having more expenses.”

The State Bond Commission will consider New Orleans’ GO refunding plan at next week’s meeting and the taxable refunding in July.

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