Timing proved crucial for city bonds

Published 12:00 am Wednesday, November 16, 2011

The City of Andalusia got its bonds sold in the nick of time, Ken Funderburk of Merchant Capital told council members Tuesday night.

Two weeks ago, the council voted to take advantage of the nation’s low interest rates by refinancing its long-term debt, and moving some bank-financed projects to the bond market.

Funderburk said the bonds were sold before Jefferson County, Ala., declared bankruptcy and the nation’s only remaining bond insurance company stopped insuring municipal bonds in Alabama. Jefferson County became the largest municipal bankruptcy in U.S. history with its $4.2 billion Chapter 9 filing last week.

“The bonds were sold about 10 days before Jefferson County filed,” Funderburk said.

The bonds varied in rates from 3.43 percent interest to 4.33 percent, he said.

“Rates have not been this low since the 1930s,” Funderburk said, adding that it was to the city’s advantage to get these rates locked in long-term.

“I can’t imagine we’ll be back refunding these deals,” he said.

The bonds rolled the financing of:

• The city’s 2002 bond issue, previously financed at 4.5 percent. This bond issue financed, among other projects, the renovation of city hall. The amortization schedule with the new bond issue keeps the payoff date for these bonds.

It also includes refinancing several projects currently financed with local bank notes at varying rates. Refinancing these in the bond issue saves a substantial amount in interest costs, officials said. They include:

• Snead-Kennedy property, financed with a local bank since purchased in the 1990s.

• the Barrow’s property, also purchased in the 1990s.

• Springdale, purchased by the city in 2010.

• The Bass Building, purchased by the city in 2010.

• Cemetery improvements, including fencing, landscaping, draining and irrigation projects. Proceeds of lot sales are earmarked for these costs.

A second series of industrial bonds financed the addition the city built to the new SaeHaeSung building. Lease payments from SaeHaeSung service the debt.