KUSD approves sale of bonds

Tonight, the KUSD Board met to discuss the resolution authorizing the issuance and sale of $9.275 million taxable general obligation refunding bonds, series 2012.  At the September 27, 2011, Board meeting, the Board voted to approve the recommendation of refinancing Fund 38 debt consisting of taxable G. O. refunding bonds, Series 2002B.  The original plan was to go out to the market in October, 2011, but this was later postponed.  Moody’s Investor Service requested an investor’s call shortly after that Board meeting.  Administration and their financial consultants, PMA Securities, postponed the offering until such time that the district’s updated rating was known.  “The Moody’s rating, as of January 18th, 2012, is A1, negative outlook.  The reasons for this rating are the CDO litigation and the material decline in the fund balance.  The district has taken a proactive approach in turning things around.”  These were the PMA Securities’ representative’s comments at tonight’s meeting.  (To read about the September meeting, click here:  Dr. Michele Hancock Announces a Bit of Good News.)

The taxable G. O. refunding bonds, Series 2002B, were originally issued to refinance the district’s unfunded pension liability with the Wisconsin Retirement System.  The original issue amount was $16.71 million.  The potential refinancing would refinance the callable maturities (eligible for prepayment – 2012 through 2020).

The 2012 refinancing would fund an escrow account (invested in U. S. government securities), which is an irrevocable trust set up for the purpose of paying off the 2002 bonds at the call date.  The escrow account also disburses funds to pay interest on the callable maturities until the call date.

On January 10, 2012, the Audit/Budget/Finance Committee reviewed the refinancing of the Series 2002B taxable G. O. bonds.  Michele Wiberg of PMA Securities was on hand to answer questions and provide further details.  With today’s low interest rates (2.19% is the true interest cost), refinancing the district’s taxable G. O. refunding bonds, Series 2002B, will result in significant debt service savings (approximately $434,000).  “The original interest rate was two times that amount.  Financing companies like to see at least a 3% savings; KUSD is saving 5.19%,” said the PMA rep.

 

 

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