Debt refinancing of convention center approved
Published 12:23 am Thursday, April 12, 2018
NATCHEZ — Natchez leaders have officially approved the refinancing of up to $7.45 million in debt on the Natchez Convention Center.
The city unanimously passed a resolution Tuesday to refinance the 2006 bonds on the convention center with the aim of saving money.
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Representing bond counsel Butler Snow law firm, Elizabeth Thomas said the resolution would grant the city “flexibility” with a development bank to either a public offering or a privately negotiated sale of the bonds.
“With the market being the way that it is right now, it may be that if we go to one of the banks personally and talk to them, that would benefit the city to get a lower rate,” Thomas said. “It’s just going to depend upon what the market does over the next couple of weeks as to whether we do a publicly offered sale or a privately negotiated sale with a bank.”
The resolution gives Mayor Darryl Grennell the authority to decide what would be best for the city based on the expected savings, though both financial advisors and bond underwriters will help with the decision.
Though City Attorney Bob Latham said the fee structure for all the parties involved in the refinancing has not yet been determined, the refinancing must net at least a 2-percent savings for the city, as required by state law.
“We are hoping that you will get more than that, obviously,” Thomas said.
She added that the refinancing would not extend the term of the bond, which is set to mature July 2024.
As part of the refinancing, the city also had to terminate a prior engagement called a swap transaction, the complicated mechanism the city used in 2006 the last time it refinanced the debt on the convention center.
At that point, Natchez engaged the Bank of New York in the complicated swap transaction, as the city literally swapped its fixed-rate payment on the debt for a floating LIBOR rate.
The city received approximately $94,000 to exit the swap agreement, Latham said. That amount was actually much more than anticipated — Latham said the city lucked out as the LIBOR rates just happened to swing in the city’s favor the day it agreed with the bank to terminate the agreement.
“When we initially got the estimate of what we would receive, it was the amount of $40,000,” Latham said. “The final payment more than doubled what we anticipated receiving.”
The expense the city incurred for an agent to execute the termination amounted to $10,000, Latham said.
A debate then ensued about how the city should spend its net $84,000 gain.
Ward 6 Alderman Dan Dillard motioned that the city dedicate the money to go toward some sort of cost associated with the refinancing of the convention center debt, while Ward 3 Alderwoman Sarah Smith said the money could go toward a separate expense that the city currently has not budgeted for.
Smith noted that the city recently agreed to pay New Orleans hotelier Warren Reuther approximately $78,000 for previous renovations of the old Broadway Street depot. Whereas the costs of refinancing, she said, would already be accounted for within the refinancing plan, the city has yet to set aside the money owed to Reuther.
Dillard disputed that and said the money could be applied to the refinancing costs in numerous ways.
“If you apply this to the principal or any of the other costs, you reduce the overall, long-range cost to the city of the financing,” Dillard said.
Dillard’s motion passed 4-1, as Smith dissented — Ward 5 Alderman Benjamin Davis was not in attendance because of a death in his family.
Afterward, a brief squabble occurred when Dillard took issue with the fact that he heard Smith mumble something under her breath following the vote, prompting Grennell to call order to the meeting.