Summary
To: Town Commission
From: JP Murphy, Town Manager; Stefan Massol, Finance Director
Date: 9/17/2019
______________________________________________________________________
Subject:
Title
Discussion and Evaluation of BB&T Revenue Bond Refinance
Summary:
Staff will present updated information relevant to a refinancing decision for the Town's Revenue Bond with BB&T.
End
Body
Previous Commission Action: Town Commission previously determined that the Town should explore a refinance with the assistance of a financial advisor. Staff subsequently re-engaged Jay Glover with PFM to serve as the Financial Advisor on this re-issuance. Brian Fender with Gray-Robinson will again serve as bond council, given his familiarity with both issues.
Background/Problem Discussion: A recent and significant reduction in interest rates has resulted in increased demand for municipal debt. In response to this market condition, staff is recommending that the Town pursue a refinance of its current revenue bond through BB&T. At the close of FY 2018-19 there will be a remaining principal balance of $7,705,000 eligible for prepayment. The current interest rate is 3.61%, and prepayment would be subject to a 1% penalty of outstanding balance ($77,050). It is estimated that the current market interest rate would be somewhere between 2.5% and 3%, resulting in interest savings to the town ranging from $700,000 to $1.400,000. This assumption is based on scenarios of 20 years at borrowing of $12,000,000 when compared to the current rate of 3.61%.
BB&T has submitted an offer for refunding, as well as a new money loan which combined would total the $12,000,000 of borrowing requested by the town. The interest rate they are offering is 2.46%. This rate is lower than the estimates provided by the Town's financial advisor. This loan would only be for a 15-year term. Also, BB&T has waived the pre-payment penalty for the original issuance and provided more favorable options for prepayment on the n...
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