BLYTHEWOOD – Town Council voted during a special called meeting last week to refinance the 2010 $5M Blythewood Facilities Corporation (BFC) bonds for a savings of $51,000 the first year and $25,000 annually, thereafter, for a total savings of $470,000 over the life of the bonds.
The Town’s payments on the bonds currently run about $350,000 annually. The refinancing is through BB&T bank, which is offering a 3.65 percent interest rate that is 8.7 percent lower than the bond’s current interest rate of 4.33 percent.
The more favorable refinancing is predicated by the release (refunding) of a $358,475 debt service reserve fund or escrow that the Town had to set aside for security at the time of the bond’s issuance in 2010. That $358,475 will now go toward reducing the loan.
That debt service reserve fund, which represented principle and interest on the loan for one year, was initially required for security on the loan for two reasons, Parker Poe representative Brent Robertson said.
“The assets being financed by the bond were not essential for governmental purposes such as an administration building or jail, but for Doko Manner and Doko Meadows. Plus, it was a brand new credit for a public offering. So investors were looking for additional security,” Robertson said. “We’re now in an environment with a private placement where an individual purchaser (BB&T) is buying the bonds. Now that it has a history of repayment, the Town is able to negotiate the release of that debt service reserve fund.”
By moving forward with the refunding (release) of the reserve fund, it can be used to downsize the amount of bonds that the Town has outstanding.
“With that reduction, the cash flow savings benefit runs about $25,000 a year with the initial year estimated at $51,000,” Robertson said.
Council authorized the refunding last fall when it decided, ultimately, not to go ahead with the refinancing at that time, so from now forward, Council will not have to take any additional action to authorize the release of the debt service reserve funds.
The bond is scheduled to be paid off in 2035.
