Central Dauphin School District
Topics for Discussion
• Refinancing Opportunity
-Series AA of 1998 ($51,790,000 outstanding)
-New money bonds that can be advance refunded at anytime
-Call date (prepayment date) is Dec 2008
Three Possible Traditional Refinancing Scenarios
*Scenario 1 – (Refund Portion of callable bonds)
-Refund approx $9.15mm
-New issue would be $10mm or less (Bank Qualified rates)
-New issue would have a 5 year call feature
-Current net savings = $251,000
-Net of negative arbitrage in escrow of approx. $112,000
*Scenario 2 – (Refund Portion of callable bonds)
-Refund approx $18.7mm
-New issue would be Non Bank Qualified
-New issue will have a 7-10 year call feature
-Current net savings = $424,000
-Net of $127,000 of negative arbitrage in escrow
*Scenario 3 – (Refund all of the callable bonds)
-Refund approx $40mm
-New issue would be Non BQ with a 10 year call feature
-Current net savings = $465,000
-Net of $757,000 of negative arbitrage in escrow
Two Possible Swap Refinancing Scenarios
*Scenario 4 – (Swaption on all callable bonds)
-If done as BMA Swaption – realize $580,000 upfront premium
-If done as Libor Swaption – realize $1,200,000 upfront
premium (assumes tax risk)
*If rates are higher in Dec 2008, Swap Counterparty
will not exercise the option so the SD will be left paying
the fixed rate on the 98AA Bonds (Still keep the upfront
premium received today)
*If rates are lower in Dec 2008, Swap Counterparty
will exercise the option, SD will issue variable rate
bonds and Swap to a synthetic fixed rate (equal to the
98AA bonds)
*Scenario 5 – (Combination of Scenario 2 and 4)
-Step 1 – Traditional refinancing on portion of 98AA bonds as
described in Scenario 2
-Step 2 – BMA or Libor Swaption on only the 2015-2018
maturities (approx $20mm)
-Total Benefit from Scenario 5
5a $424,000 from traditional refinancing
$300,000 from BMA swaption
$724,000 total benefit
or
5b $424,000 from traditional refinancing
$675,000 from Libor Swaption (assumes tax risk)
$1,099,000 total benefit
• Estimated timeframe for Traditional refinancing
-Initial Presentation and Authorization to proceed Jan 10
-Bond Sale (lock in rate/savings) Jan 24
-Settlement early March
• Estimated timeframe for Swap refinancing
-Initial Presentation and Authorization to proceed Jan 10
-2nd Presentation to entire Board or Swap committee Jan 24
-Swap execution Feb/March