EPISD to refinance $41.6 Million in order to save $4 Million
By: Jose G. Landa, Eagle Pass Business Journal, Inc., Copyright 2016
The Eagle Pass Independent School Board of Trustees heard a presentation from EPISD Financial Advisor David Gonzalez of Espinoza and Hinojosa & Company, Inc. and Bond Counsel Juan Aguilar of Escamilla and Poneck during agenda item No. 1 which called for the consideration and approval of an order authorizing the issuance of Eagle Pass Independent School District Unlimited Tax Refunding Bonds, Series 2016, entering into an escrow agreement. a purchase contract, and a paying agent/registrar agreement, delegating to certain district administrative staff and officials the authority to approve all final terms of the bond, and other matters related thereto.
During the presentation, Gonzalez advised the Board that what was being considered for refinancing was the 2008 EPISD Bonds that were used to build the Student Activity Center and the Armando Cerna and Perfecto Mancha elementary schools.
“ We identified a refinancing opportunity for the district’s outstanding debt, specifically the 2008 A- Series bonds that were issued,” said Gonzalez.
Gonzalez advised that under current market conditions, EPISD is able to refinance $41,665,000 for a net-present value savings of $4,144,000 or a 9.9 % savings.
Gonzalez presented graphs and charts of the how the refinancing process works and how it would take place.
“The district will be looking at a percentage savings on an annual basis of about $249,000. If we enter the current market and refinance, these bonds we are looking at are at a true interest cost of 3.16%.” added Gonzalez.
Gonzalez noted that EPISD is currently paying interest in the average of 4% and if it was to decide to refinance the bonds and lock in under the current market percentages it would be saving and locking in decreased interest percentages.
“Instead of paying a 4% you would be locking in 1.2%, 1.3% going all the way to 2 or 3%. And that’s where the savings would come from.” said Gonzalez.
“Current market conditions allow for a significant amount of savings.” said Gonzalez.
Gonzalez stated that in all the total savings to the School District if elected to proceed with the action would be a savings of $4,144,004.
Gonzalez stated the School Board would solely be approving the setting of specific parameters to save at least 6% to refinance the $41,635,000 not interest rates and specific terms on the refinancing which would be set in place at a later date.
The preliminary date to close the process is expected to be March 17, 2016 if all parameters can be met.
“It is a very significant savings compared to what we have seen in the past. I think this is the largest transaction that the district has done in many years. Again this is a savings opportunity and is not a new money issuance , but nonetheless there is a significant amount of savings,” said Gonzalez.
Gonzalez stated the State shared a percentage of the debt under the IFA and EBA programs and would also would be sharing in some of the savings as well.
Bond Counsel Juan Aguilera presented information and certain details including the amending of state law to allow for school districts to be able to refinance debt under the adoption of a parameters order which a requires for a minimum of a 6% savings.
Board President Fuentes asked if the Board had any comments or a call for action.
Board member Ignacio Saucedo asked if their could be an explanation given on negative arbitrage.
Gonzalez and Aguilera explained the process and how it could effect percentages under market interest rate conditions if the board would wait to refinance all the way to the call date of 2018.
Board member Rudy Bowles motioned for the item to be approved and Board member Hilda Martinez seconded the motion.
Fuentes called the agenda item for a vote and it was approved unanimously.
