DALLAS -Shreveport, La., will refund variable-rate bonds issued in 2000 to finance the expansion of a football stadium with next week's negotiated sale of $35 million of fixed-rate debt.
The revenue bonds will be issued by the Louisiana Local Government Environmental Facilities and Community Development Authority, which also issued the two series of original bonds in 2000.
The sale is set for Tuesday.
The city in northwest Louisiana opted to refund the 2000 bonds because they were insured by MBIA Insurance Co., which lost its triple-A ratings in the ongoing turmoil in the credit market, said Jerry Liang of Grigsby & Associates Inc., the city's financial adviser.
"With the downgrade of MBIA, the bonds were basically unmarketable as variable-rate debt," Liang said.
The refunding bonds, which are supported by city revenues except for property tax collections, are rated A by Standard & Poor's. The city's outstanding general obligation bonds are rated A-plus by Standard & Poor's and A3 by Moody's Investors Service.
Stephens Inc. is the lead underwriter, with Loop Capital Markets LLC as co-manager.
Shreveport's co-bond counsels are the Boles Law Firm APC and Jacqueline Scott & Associates ALPC.
Without the refunding, Liang said, the bonds would reset at a much higher interest rate on Sept. 1.
"The bonds were issued in 2000 as variable-rate debt that reset weekly, but about five years ago the bonds were remarketed on a fixed-rate basis at an interest rate of 2.93%," Liang said. "That is going to run out at the end of this month, and the interest rate would be set at the maximum of 8%."
Proceeds will also be used to pay a swap termination fee on the 2000 bonds that Liang estimated at about $1 million.
Liang said the refunding would provide net present-value savings of about $6 million.
"If this were a normal market, we would have lined up a liquidity provider and wouldn't have needed to refund the bonds," he said. "We tried to obtain bond insurance for this issue, but there was just no interest from the providers. In part that's because there is no specific revenue stream dedicated to the bonds."
Earlier this year Shreveport refunded $42 million of bonds that were issued to finance a convention center hotel and is considering restructuring debt that paid for projects at the airport, Liang said.
"The city's not trying to refund all the variable-rate debt, but just the insured variable-rate debt," he said. "We're getting close to that goal."
The bonds issued in 2000 financed an expansion at the city-owned Independence Stadium from 40,000 seats to almost 51,000, along with the addition of skyboxes and other improvements.
City officials said they do not expect to issue additional tax-supported debt this year, but may ask voters to approve a bond package of as-yet undetermined size in 2009 for public works projects and neighborhood revitalization.
Shreveport has a population of about 202,000 and is located approximately 200 miles east of Dallas.