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DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010. Presented By:Steven J. Stogel In Participation With:Deborah Richman Head of The Turning Point School Dated:January 23, 2010. Turning Point School Phase I - PowerPoint PPT Presentation

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  • DEBT FINANCING OPTIONS FORREFINANCING OR CAPITAL PROJECTS

    CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLSJANUARY 23, 2010Presented By:Steven J. Stogel

    In Participation With:Deborah RichmanHead of The Turning Point School

    Dated:January 23, 2010*

  • Turning Point School Phase I8780 National BoulevardCulver City, CA*

  • Site Plan of Phase I (2.0 acres) and Phase II (1.8 acres)Increased enrollment capacity from 350 to 480!*PHASE IIPHASE I

  • *Phase II Existing Condition

  • *Interior of Phase II As-Is

  • *New Phase II Site Plan

  • *New Lobby

  • *Phase II Schematic

  • *New Auditorium & Theater

  • *Phase II Multi-Media Room

  • Phase II Project and Financing:

    Original (2006) Estimated ConstructionCosts (2012 start)$10,000.000Original Estimated Total DevelopmentCosts including A&E, title, legal, insurance and other costs$15,000,000

    Actual 2009 Construction Costs, all in$ 7,700,000Actual Total Development Costs$11,500,000

    *

  • Tax Exempt Debt Terminology:

    Unenhanced Enhanced (Letter of Credit (L.C.)) Fixed Floating LIBOR and SIFMA Index Section 501(c)(3) Section 145 Bank Qualified Bonds (BQBs) Issuer Term of Bonds Terms of Enhancement/Balloon Date Prepayment Lock-out/Yield Maintenance Project Financing Pledge Financing

    *

  • FORMAT OF TAX EXEMPT BONDS

    501(C)(3) BQBs

    Issue:Qualifying AgencyQualifying Agency

    Trustee:Bank/CustodianBank/Custodian

    Offering:PublicDirect to Bank

    Securities Law:YesNo

    Legal & Other Costs:2-4%1.5-3%

    L. C. Bank:Rating of L.C. Bank is KeyDetermined by Bank

    Unenhanced:Rating/Condition of School is KeyDetermined By Bank

    Interest Mode:Fixed/FloatingFixed/Floating

    *

  • *

  • *http://www.sifma.org/SECURITY INDUSTRY AND FINANCIAL MARKETS ASSOCIATION SIFMA INDEX

  • ORIGINAL TURNING POINT PHASE I FINANCING

    Issue Date:2001

    Original Issue:$12,000,000

    Issuer:California State-Wide Community AgencyIRC Code Authorization:Section 501(c)(3)Form:UnenhancedInterest Rate:6.5%Term:30 year, self amortizing

    *

  • Issue Date:September 19, 2009Amount:$11,370,000Issuer:California Municipal Finance AuthorityIRC Code:BQBsForm:Enhanced with a US Bank Letter of CreditAnnual Floating Rate:13 b.p. (1/13/10)

    Annual L.C. Costs200 b.p.CAP Purchase:400 b.p.Amortization:Level 30 year schedule (after 16 month interest only period)

    Term of L. C.10 years

    *CURRENT TURNING POINT PHASE I REFINANCING

  • Issue Date:September 19, 2009Amount:$6,865,000 (New Construction)Issuer:California Municipal Finance AuthorityIRC Code:BQBsForm:Enhanced with a US Bank Letter of CreditAnnual Floating Rate:13 b.p. (1/13/10)

    Annual L.C. Fee200 b.p.CAP Purchase:400 b.p.Amortization:Level 30 year schedule (after 16 month interest only period)

    Term of L. C.10 years

    *CURRENT TURNING POINT PHASE II FINANCING

  • TOTAL COST OF PERMANENT FINANCINGPHASE I AND PHASE II

    Phase IPhase I & II **2001 Series * 2009 Series

    Annual Cost$975,000$ 940,000

    $ 385,000 Interest, L.C. Fee and Other 535,000 2011 Principal 25,000 CAP Cost @ $25,000$ 940,000

    * Original Phase I debt was $12,000,000.** Based on $15,000,000 balance, as of 1/1/11, net of programmed reductions of principal.

    *

  • SPECIAL RULES FOR BANK QUALIFIED BONDS (BQBs)

    General Rule for Acquiring/Carrying Tax Exempt Debt 1986 Rules under TRA of 1986 $10,000,000 limit per City (including City and non-profits!) Interest non-AMT 80% interest deduction 2% test for Banks as Purchaser 2009 Rules under the American Recovery & Reinvestment Act (the Obama Stimulus Bill) $30,000,000 limit per City and per every (c)(3) non-profit Interest non-AMT 100% interest deduction Expand 2% test for Banks

    BQBs can be issued only until December 31, 2010

    *

  • BANK UNDERWRITING CONSIDERATIONS IN L. C. FORM OR BQB

    Term of Bonds Term of Enhancement Financial Statement of School Cash Flow Consistency Enrollment History Who is on the Board of Directors Annual Giving Percentage of Scholarship Support Prior Capital Campaigns Endowment Real Estate Appraisal Tests Real Estate Value-As-Is Going Concern as a School Recourse School Assets Negative Pledge Financial Covenants No Material Adverse Change Liquidity Covenant Relationship (Prior & Future) with Bank Time Lines Conventional Loan Alternative

    *

  • INTEREST RATES RANGES(1/11/10)

    SECTION 501(c)(3)

    UnenhancedL. C. FloatingL. C. Fixed 5 yrs.L. C. Fixed 10 yrs.

    6.5%SIFMA Index 3.75% 4.5% + 2.00 - 2.25%L.C. Fee & Other = 2.25 - 2.75%

    BQBs

    UnenhancedFloating 5 Year 10 Year

    N/A67% of 30 day 3.25% 4% LIBOR + 160 200 b.p. spread = 1.75% to 2.25%

    *

  • BOARD CONSIDERATION IN USE OF DEBT

    Refinancing to Lower Costs

    New Debt to Build Costs of Construction Today! Impact on Enrollment A Positive!

    Effects on Fund Raising For Construction of Capital Projects Pre Construction Start: Easiest for both restricted or unrestricted gifts During Construction: Well received as new construction is tangible and present Post Completion of Construction hardest, but multi-year (even up to 7 years!) pledges from Day 1 are readily incorporated into Financing Model

    Long After Completion of Construction Next Phase Story Debt Retirement Enrollment Strategy

    Each Schools Story is Unique

    *

    ***********************