WASHINGTON — Two more Ohio school districts have disclosed that they are authorized to redeem Build America Bonds they issued in 2010 because of reduced subsidy payments due to sequestration.
The Princeton City School District, which issued $105.24 million of BABs, and the Cory-Rawson Local School District, which issued $6.21 million, disclosed that they can redeem their bonds in event notices filed on the Municipal Securities Rulemaking Board's EMMA system on Monday.
Several other issuers, including other Ohio school districts, have also filed similar notices in the past few months.
BABs issued by the Cory-Rawson district will be refunded with tax-exempt bonds that will be priced on Wednesday, said Omar Ganoom, managing director of Ross, Sinclaire & Associates, which is underwriting the refunding issue. No date has been set yet for a full or partial refunding of the Princeton district BABs, but hopefully tax-exempt refunding bonds will be issued by the end of June, said Brad Ruwe, an attorney at Dinsmore & Shohl LLP, which is serving as bond counsel on the upcoming deal.
The BAB program allowed state and local governments in 2009 and 2010 to issue taxable bonds and receive subsidy payments from the Treasury Department equal to 35% of the interest costs. But the payments to issuers were reduced by 8.7% for part of fiscal 2013 and are being reduced by 7.2% in fiscal 2014, which began Oct. 1, because of federal spending cuts known as sequestration.
The Cory-Rawson and Princeton school districts are not reporting interest payment delinquencies due to the reduced subsidy payments.
However, because the school districts received reduced subsidy payments for their BABs, the extraordinary optional redemption provisions in the official statements for the bonds have been triggered. These provisions allow the issuers to redeem their BABs at any date prior to maturity at a price equal to 100% of the principal amount plus accrued interest to the redemption date.
The Princeton school district is located in southwestern Ohio, about 15 miles north of Cincinnati. Its BABs were issued to pay for a portion the costs of constructing and renovating school facilities as well as providing equipment and site improvements for the buildings. The BABs were also used to refinance bond anticipation notes, according to the official statement.
Robert W. Baird & Co. was underwriter. Peck, Shaffer & Williams LLP, now a division of Dinsmore, was bond counsel.
The Cory-Rawson school district is located in Hancock County in northwestern Ohio. Its BABs, some of which have already matured, were issued to finance the construction, furnishing and equipping of school facilities as well as to retire notes that had been previously issued for the same purpose, according to the official statement.
Stifel, Nicolaus & Co. was underwriter and Bricker & Eckler LLP was bond counsel.