DALLAS — Louisiana State Bond Commission gave the final go-ahead Thursday to a $430 million fixed-rate refunding set for mid-January by the Louisiana Stadium and Exposition District.
Proceeds will refund $294.3 million of variable-rate bonds the District issued in March 2006 and terminate floating-to-fixed rate swap agreements.
The issue will include $315 million of tax-exempt debt, $55 million of taxable debt, and up to $60 million of taxable bonds that the state will purchase.
Bank of America is the lead underwriter for the sale tentatively set for Jan. 16. Foley & Judell LLP is bond counsel for the District
Treasurer John Kennedy said the negotiated sale on Jan. 16 should be the final chapter for the $294.3 million of variable-rate bonds the District issued in March 2006 but then were purchased by the state in 2008 when the auction-rate market failed.
"This will end that sad saga," said Kennedy, who chairs the Commission. "I want to get this deal closed."
The refunding will lower the District's annual debt service, enhance the state's liquidity, and allow the $200 million of state money now tied up with the Superdome bonds to be invested at a higher return, Kennedy said.
The outstanding variable-rate bonds were issued in March 2006 to provide new money for repairs to the Superdome in New Orleans after hurricanes Katrina and Rita in 2005. Proceeds also were used for working capital and debt restructuring.
Louisiana purchased 99% of the outstanding tax-exempt 2006 bonds in March 2008 and has been holding the $233.1 million at 1.25% interest since then, said Meredith Hathorn of Foley & Judell.
The IRS must be notified by Jan.1 that the refunding has been authorized or the bonds being held by the state would lose their tax exemption, she said. District trustees approved the refunding Dec. 19.
Evan Holmes, director of business operations for Mercedes-Benz Superdome manager SMG Services, said debt service on the 2006 bonds is one of the District's largest annual expenditures.
"In the long term, this is the best case for us," Holmes said.
Hotel tax revenues are sufficient to cover the expected annual debt service of $25.6 million and provide working capital, Hathorn said, Actual collections from April 2011 to May 2012 totaled $37 million.
January's sale will terminate floating-to-fixed rate swaps on the four tranches from the 2006 issue, Hathorn said. The current plan does not include terminating the fixed-to-fixed swaps, but that could be accomplished if market conditions are favorable.
"Our goal is to get rid of all the swaps," Hathorn said. "The market has moved to where that might be possible."
Terminating all the swaps would cost $121.5 million, said Whit Kling, director of the Commission.
The state will purchase at least $50 million of the taxable bonds, she said, and possibly as much as $60 million.