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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 1

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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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Page 1: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

DEBT FINANCING OPTIONS FORREFINANCING OR CAPITAL PROJECTS

CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLSJANUARY 23, 2010

Presented By: Steven J. Stogel

In Participation With: Deborah RichmanHead of The Turning Point School

Dated: January 23, 2010

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Page 2: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

Turning Point School – Phase I8780 National Boulevard

Culver City, CA 2

Page 3: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

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

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PHASE II PHASE I

Page 4: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

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Phase II – Existing Condition

Page 5: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

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Interior of Phase II – As-Is

Page 6: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

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New Phase II Site Plan

Page 7: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

7New Lobby

Page 8: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

8Phase II Schematic

Page 9: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

9New Auditorium & Theater

Page 10: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

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Phase II Multi-Media Room

Page 11: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

Phase II Project and Financing:

Original (2006) Estimated ConstructionCosts (2012 start) $10,000.000

 Original Estimated “Total DevelopmentCosts” including A&E, title, legal, insurance and other costs $15,000,000

 

Actual 2009 Construction Costs, all in $ 7,700,000 

Actual Total Development Costs $11,500,000

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Page 12: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

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

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Page 13: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

FORMAT OF TAX EXEMPT BONDS

501(C)(3) BQBs

Issue: Qualifying Agency Qualifying Agency

Trustee: Bank/Custodian Bank/Custodian

Offering: Public Direct to Bank

Securities Law: Yes No

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

L. C. Bank: Rating of L.C. Bank is Key Determined by Bank

Unenhanced: Rating/Condition of School is Key Determined By Bank

Interest Mode: Fixed/Floating Fixed/Floating

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Page 14: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

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Page 15: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

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http://www.sifma.org/

SECURITY INDUSTRY AND FINANCIAL MARKETS ASSOCIATION

“SIFMA” INDEX

Page 16: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

ORIGINAL TURNING POINT PHASE I FINANCING

Issue Date: 2001

Original Issue: $12,000,000

Issuer: California State-Wide Community Agency 

IRC Code Authorization: Section 501(c)(3) 

Form: Unenhanced 

Interest Rate: 6.5% 

Term: 30 year, self amortizing

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Page 17: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

Issue Date: September 19, 2009 

Amount: $11,370,000 

Issuer: California Municipal Finance Authority 

IRC Code: BQBs 

Form: Enhanced with a US Bank Letter of Credit 

Annual Floating Rate: 13 b.p. (1/13/10)

Annual L.C. Costs 200 b.p. 

CAP Purchase: 400 b.p. 

Amortization: Level 30 year schedule (after 16 month interest only period)

Term of L. C. 10 years

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CURRENT TURNING POINT PHASE I REFINANCING

Page 18: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

Issue Date: September 19, 2009 

Amount: $6,865,000 (New Construction) 

Issuer: California Municipal Finance Authority 

IRC Code: BQBs 

Form: Enhanced with a US Bank Letter of Credit 

Annual Floating Rate: 13 b.p. (1/13/10)

Annual L.C. Fee 200 b.p. 

CAP Purchase: 400 b.p. 

Amortization: Level 30 year schedule (after 16 month interest only period)

Term of L. C. 10 years

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CURRENT TURNING POINT PHASE II FINANCING

Page 19: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

TOTAL COST OF PERMANENT FINANCINGPHASE I AND PHASE II

Phase I Phase 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.

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Page 20: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

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

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Page 21: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 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

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Page 22: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

INTEREST RATES RANGES(1/11/10)

SECTION 501(c)(3)

Unenhanced L. C. Floating L. 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

Unenhanced Floating 5 Year 10 Year

N/A 67% of 30 day 3.25% ± 4% ±LIBOR + 160– 200 b.p. “spread” = 1.75% to 2.25%

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Page 23: DEBT FINANCING OPTIONS FOR REFINANCING OR CAPITAL PROJECTS CALIFORNIA ASSOCIATION OF INDEPENDENT SCHOOLS JANUARY 23, 2010

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 School’s Story is Unique

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