The San Francisco Airport Commission refunds $110 million in fixed-rate revenue bonds with new variable-rate bonds to lower its overall interest cost.  •  The San Dieguito Union High School District responds to the turbulent auction-rate market by converting $90 million in ARS bonds to fixed-rate securities.  •  De La Rosa & Co. generates $41 million of retail orders to reduce yields and save the L.A. County Metropolitan Transportation Authority significant interest costs on a $25-million Sales Tax Revenue Bond issue.  •  The L.A. Community Redevelopment Agency obtains a strong investment-grade rating on a $12.5-million Taxable Tax-Allocation Bond issue for the Westlake Recovery Project.  •  Despite a tough market, Beverly Hills successfully refunds $31 million in water revenue bonds and $17 million in wastewater revenue bonds for economic savings.  •  The Gridley Redevelopment Agency clears various hurdles caused by tightening credit in the municipal market to successfully execute its first tax-allocation bond financing.  •  Riverside issues unenhanced Bond Anticipation Notes to mute the effects of the collapse of auction-rate securities and prudently control interest costs.  •  The Sacramento Regional County Sanitation District restructures $50 million in auction rate securities with better performing, direct pay variable-rate bonds backed by letters of credit.  • 
 

Palmdale Seizes Control of Energy Destiny

$19,960,000
City of Palmdale
Taxable Certificates of Participation
(2007 Land Acquisition Financing Project)
In April 2007, De La Rosa & Co. served as sole Senior Manager on the City of Palmdale’s federally taxable Certificates of Participation (COPs) to acquire about 600 acres for a 550-megawatt power plant and other uses.

Before the financing, Palmdale committed itself to providing some or all of its electrical power, believing this would significantly help attract and retain businesses. When this parcel became available, civic leaders set out to buy it for $18 million.

The city’s two key objectives were issuing the bonds for the property at low borrowing costs, and retaining maximum financial flexibility to redeem the bonds if the business plan changed. De La Rosa helped achieve those goals by securing a strong rating, pre-marketing broadly to investors, and tailoring specific and aggressive call features for flexibility.

Standard & Poor’s gave the COPs an underlying ‘A’ rating – remarkable considering that they were to be secured by raw land without a municipal facility or other essential asset. Based on this rating and the city’s intention to pay off the financing as soon as construction began on the power plant, DLR convinced officials they could save more than $500,000 by issuing the bonds without municipal insurance.

De La Rosa broadly pre-marketed to investors. Given the COPs’ taxable status, the firm targeted institutional investors and distributed a sales-point memo to familiarize the Sales and Trading Desk with the strengths of the credit and advantages of Palmdale’s business plan.

DLR bankers worked closely with officials to find a balance of optional redemption features that would accommodate the city’s needs and still be acceptable to the most aggressive investors in the marketplace. The COPs included a 10-year optional call feature with no prepayment penalty and two extraordinary call features: beginning April 1, 2010 (at par) from proceeds from the sale of any or all of the property; and on any date (at par) for the transfer of title, commencement of construction, or other key milestones relating to the development of the power plant.

Although there were no direct comparables given the COPs’ extraordinary call features, De La Rosa achieved pricing spreads similar to other taxable municipal transactions that came to market at the same time. Meeting Palmdale’s goals ensured a successful pricing and financial flexibility to develop the city’s power-generating capacity.
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