Rules don’t allow Opp’s planned refinance

Published 1:39 am Tuesday, October 17, 2017

The Opp City Council learned Monday night that it will have to wait until January to proceed with the refinancing of its 2011 bond issue of $6 million to fund Mizell Memorial Hospital.

Ken Funderburk of Stifel Merchant Capital told the council that since the city refinanced the utilities department’s 2007 bond issue earlier this year, and had a few other loans out, that refinancing would put them over the threshold for the bank-qualified debt limit of $10 million.

In September, Randy Rushton of Frazier Lanier Co., presented the council with plans that would make the new interest rate 2.5 percent from its current 4.19 percent if the hospital bonds were refinanced. Rushton told the city it could take $355,000 in the deal for economic development.

However, Funderburk explained that when they did the utilities refinance of nearly $5 million that it was done on the private market, and sold to a single buyer. Therefore, it doesn’t show up on Bloomberg as part of the city’s debt, but it still counts toward the city’s debt limit for the calendar year.

Funderburk explained that if the city went above the $10 million that both bond refinances would become taxable.

“It would be an expensive mistake,” he said.

Funderburk suggested that the council refinance that debt, but in the new calendar year or straddle the year.

“Do the deal in the calendar year, but don’t close it until 2018,” he said.

Monday afternoon figures showed that it would be better for the city to refinance on the public market, but Funderburk explained that the true numbers would come when it was time for the refinance.

“The bond market has ticked down in the last week and more today,” he said.

Funderburk said that big money center banks – five of them – are playing in the market at the levels needed.

Conducting the refinance privately gives less paperwork, he said. It also gives the ability to lock in the rate.

Monday’s numbers would take the interest rate to 2.99 percent if they went the private route, and 2.77 percent if they went the public route.

Funderburk said he felt like he could negotiate down the private rate at least 10 points since the private side had not adjusted its rates.