|DATE:||Tuesday, October 17, 2017|
|TO:||School Board Members|
|FROM:||Jeff Eakins, Superintendent|
|SUBJECT / RECOMMENDATIONS|
|Approve Refunding of the Outstanding Certificates of Participation (COPs), Series 2008A (the “Refunded Certificates”) and Termination of Swap. Accept Selection of JPMorgan Chase Bank, N.A. to Provide Direct Placement of the 2008A COPs. (Business Services Division)
1. Adopt the Board Certificate Resolution authorizing the refunding of the Refunded Certificates and the termination of the associated swap with UBS AG or, in the alternative, an extension of the Index Rate period through July 1, 2023, with a direct placement with JPMorgan Chase Bank, N.A. Authorize the use of an underwriting syndicate including J.P. Morgan Securities, LLC, for this transaction. Authorize staff to work with the District’s Financial Advisor and Bond Counsel to proceed with the refunding and/or the Index Mode extension as long as market conditions remain favorable; 2. Recess as members of the School Board and convene as the School Board Leasing Corporation; 3. Adopt the Corporate Resolution authorizing the refunding of the Refunded Certificates; and 4. Adjourn as members of the School Board Leasing Corporation and reconvene as the School Board.
|The District’s COPs, Series 2008A, currently outstanding in the amount of $109,525,000, bear interest at a SIFMA Index Rate and are held in a “direct placement” facility with PNC Bank. On November 21, 2017, that facility will expire and the COPs are subject to mandatory tender for purchase. On or prior to that date, the District must arrange for an extension of the existing facility, secure a replacement facility, or remarket or refinance the 2008A COPs in a different interest rate mode. The District’s financial advisor, Ford & Associates, Inc., has provided an analysis showing that a fixed rate refinancing of the 2008A COPs, and a termination of the associated interest rate swap agreement with UBS AG, is more economical for the District. Based on market conditions as of August 29, 2017, Ford & Associates estimates that the refunding/swap termination approach will allow the District to save, on a net present value basis, approximately $324,000 compared to an extension of the Index Rate Mode through the final maturity of the 2008A COPs (July 1, 2023) via procurement of a new direct placement facility.
As an alternative to the refunding plan and as a hedge in the event that market conditions become less advantageous, Ford & Associates issued, on the District’s behalf, a request for letters of interest from banks desiring to provide a new direct placement facility and received responses from four financial institutions for direct purchase of the District’s 2008A COPs, as well as alternative structures. Based on the evaluation of the proposals by staff, our financial advisor, and bond counsel, we recommend the selection of JPMorgan Chase Bank, N.A., to provide for direct placement of the Series 2008A COPs, for a new SIFMA Index Rate commencing on or about November 21, 2017, and ending on July 1, 2023.
This agenda has been reviewed as to legal form and sufficiency by John Stokes, Bond Counsel, and as to financial accuracy by Jerry Ford, Financial Advisor. Mr. Stokes and Mr. Ford will be present to answer questions and assist the Board in this endeavor.
A copy of both the Certificate Resolution and the Corporate Resolution are available for viewing in the School Board office.
|• Establish a strong foundation of financial stewardship|
|FINANCIAL IMPACT (Budgeted: No)|
|A remarketing of the 2008A COPs with a new direct placement facility is expected to result in an average annual increase in the District’s debt service payments of approximately $208,000 when compared to the interest rate on the expiring direct placement facility. In addition, the District will separately pay costs of issuance estimated at $175,000 to $225,000. A swap termination and fixed rate refunding of the 2008A COPs, which will pay estimated costs of issuance of approximately $880,000 through the financing, is expected to result in an average annual increase of approximately $113,000 when compared to the interest rate on the expiring direct placement facility. The net present value benefit of the refunding/swap termination approach is currently estimated at $324,000.|
|After reviewing the outstanding debt issues and tracking the financial market, the District will receive a net present value in savings for this transaction.|
|SUBMITTED BY: Steve Brady, Department Manager for Cash Management|
|Gretchen Saunders||Dr. Alberto Vázquez|
|Chief Business Officer
|Chief of Staff
|Hillsborough County Public Schools (Florida) * Mtg.#20171017_822 (Board Meeting) * Section C Item# 6.02|