FOR IMMEDIATE RELEASE: May 25, 2007
City converts $115 million variable rate bonds to fixed rate
The City of Kansas City, Mo., on May 22 successfully priced a fixed rate conversion of a portion of its $295 million of outstanding variable rate bonds previously issued for the downtown entertainment district project. The City's Industrial Development Authority issued the $114.9 million refinancing. The net proceeds of the refinancing will be used to redeem the authority's outstanding $115 million series 2005A variable rate bonds that had been issued in variable rate mode with interest rates being reset weekly.
"It's important that the City undertook this initial step to make its debt burden more manageable with respect to the downtown entertainment district project," Mayor Mark Funkhouser said.
The series 2005A bonds were converted to fixed rates to maturity, with a true interest cost of 4.56 percent. The market was relatively quiet May 21, the day before the pricing and opened the same way the morning of May 22. The tax-exempt market began to trade at slightly higher levels beginning at mid-day in tandem with higher rates in the treasury market. Higher treasury rates were attributable to a relatively large amount of corporate bond issuance and a generally negative market sentiment despite no economic releases.
"With this restructuring, the debt component of this project will now be much more predictable and we can now focus our attention on completing construction," City Manager Wayne A. Cauthen said.
The City used the negotiated method of sale with Oppenheimer & Co. Inc. serving as senior managing underwriter on the transaction and the firms of Piper Jaffray & Co. and Harvestons Securities Inc. (a City-certified disadvantaged business enterprise) in the role of managers. The City's financial advisers, First Albany Capital and Valdes & Moreno Inc., closely guided the underwriting syndicate.
"We are pleased to be able to rebalance our debt portfolio in our continuing efforts to proactively manage risk," said Debra Hinsvark, chief financial officer and director of the Finance Department.
The series 2005A bonds are insured by Ambac, and thus are rated Aaa/AAA/AAA by Moody's Investors Service, Standard & Poor's and Fitch Ratings, respectively. The underlying ratings of the bonds are A2/AA-/AA, respectively. Kutak Rock LLP and Hardwick Law Firm LLC served the City as bond counselors. Bryan Cave LLP served as underwriters' counsel.
Media inquiries and other requests for more information about this transaction should be directed to Randall Landes, city treasurer in the Finance Department, (816) 513-1024.