Toll authority refinancing shaky bonds
Orlando’s toll-road agency plans to refinance nearly half a billion dollars of debt, a move that officials say could bring a savings of nearly $36 million over the next couple of decades.
The key part of the transaction for the authority is ridding itself of more than $241 million worth of variable-rate debt that has been a drag on it since the economic crash of 2007-08. The variable bonds are set to be replaced with fixed-rate bonds on Thursday.
The agency also plans to sell another $242 million worth of fixed-rate bonds and put bonds that pay a lower fixed rate in their place.
The combined result of the sales, authority officials said Wednesday, shouldreduceinterest payments by about $36 million. Officials did not say where the savings might go, though they most likely will go into back into agency coffers, at least for the short term.
“It’s a continued big step in the right direction,” said Scott Batterson, who sits on the board of the Orlando Orange County Expressway Authority.
The agency initially anticipated those sales would save about $11 million once prepayment penalties and other expenses were figured in, but historically low interest rates changed the equation in the authority’s favor, said chief financial officer Nita Crowder.
“The market was very friendly to us,” she said.
Crowder also intends to swap out another $166.6 million worth of variable debt for fixed-rate bonds in coming weeks. If successful, that would reduce the agency’s amount of variable-rate debt to about $600 million. The total debt is $2.7 billion.
The bonds set to be sold Thursday were originally issued in 2003, when complex interest rate swaps were popular. But the economic meltdown made the variable-interest bonds losers because fixed rates fell dramatically.
The authority had so much variable-rate debt on its books that Moody’s Investor Service dropped the agency’s bond rating a year ago, which can increase borrowing costs. At the time, the agency owned nearly $1 billion worth of variable rate bonds.
The authority board has wanted to rid itself of the variable-rate bonds since the recession hit, but could not earlier because the costs were too high. Thatchangedas the rates continued falling.
“It’s been a long process, but I think we’re solid,” said board member Tanya Wilder.
The variable-rate deals originally were guaranteed by insurance companies, but they no longer issue such assurances because they have fallen on hard times.
That forced the authority to prop up the variable-rate bonds with lines of credit purchased from various financial institutions. Those pacts usually were good for two to three years, but cost millions of dollars apiece, further driving up the cost of the initial deals.