Summary:
GOAA has requested that City Council concur in GOAA's approval of the following items from its June 24, 2015 meeting:
GOAA Consent Agenda Item B - Approval of the Phase I and Phase II Amendments to the Greater Orlando Aviation Authority Airport Facilities Revenue Bond Resolution adopted on June 13, 1978 Authorizing Airport Facilities Revenue Bonds of the City of Orlando (“Bond Resolution”). The Aviation Authority Staff has been working on updates to the Bond Resolution. The Authority has two primary purposes in proposing the amendments.
First, Phase I of the changes is to clean up and modernize the Bond Resolution by eliminating obsolete and archaic terms from the original resolution adopted June 13, 1978, as amended from time to time and to elevate the payment of Subordinated Indebtedness in the Flow of Funds, thereby improving the credit rating on the Authority’s subordinate debt.
Second, Phase II contains substantive changes to Definitions, Section 204 Additional Bonds, 405 Deposit of Revenues, Section 416 Released Revenues and 711 Rates & Charges also for the purpose of improving the credit rating on the Authority’s subordinated debt, and numerous other changes to improve the Authority’s flexibility and clarify the Authority’s rights and obligations in a manner consistent with many modern bond resolutions.
GOAA is seeking the City's approval of the Phase I and Phase II amendments to the Bond Resolution as detailed in the attached GOAA memo and corresponding Resolutions on file in the City Clerk's Office.
GOAA Consent Agenda Item E - Approval of the Termination of the Gulf Breeze/J.P. Morgan Interest Rate Swap and the GOAA/Goldman Sachs Interest Rate Swap.
Since 1985, the City of Gulf Breeze, FL (Gulf Breeze) has sponsored intergovernmental loan pool programs to provide low cost financing to local governments throughout Florida. In 1997, Gulf Breeze issued $90.055 million of fixed rate bonds (the “1997 Gulf Breeze Bonds”) with a coupon of 4.50% and a final maturity of 2027 with sinking fund installments beginning 2023. Gulf Breeze converted the fixed rate debt to a variable rate through a swap with J.P. Morgan (the “J.P. Morgan Swap”). J.P. Morgan pays Gulf Breeze 4.50% in exchange for a payment of Securities Industry and Financial Markets Association Municipal Swap Index (SIFMA) less 0.26%. GOAA entered into a variable rate loan with Gulf Breeze (the “1997B Bonds”) for the purpose of providing funds to finance a portion of the costs of acquiring and constructing various improvements to the Airport’s terminal facility, airfield, roadways and parking facilities and simultaneously converted the variable rate loan to a fixed rate obligation by entering into a fixed rate swap with Goldman Sachs Mitsui Marine (the “Goldman Sachs Swap”). The Series 1997B Bonds are subordinated to all of GOAA’s outstanding debt. Under the Goldman Sachs Swap, GOAA is obligated to pay Goldman Sachs 4.45% in exchange for receiving SIFMA. With both swaps taken into account, GOAA effectively has a loan rate equivalent to approximately 4.54% (net of all loan administrative and marketing fees) on a deeply subordinated basis while eliminating any of the risks associated with variable rate bond programs. The loan is not based on variable rate bonds and therefore is not subject to a put and doesn’t need liquidity support of any kind. This is currently the only swap GOAA has outstanding.
On December 18, 1997, the GOAA Board adopted a Resolution Authorizing Participation in the Gulf Breeze, Florida Capital Funding Program (the “Authorizing Resolution”). The Authorizing Resolution contains a provision which requires the consent of the bond insurer, MBIA, in addition to the bondholders, for any amendments to the Authority’s Bond Resolution. Additionally the Authorizing Resolution requires the consent of MBIA and the City of Gulf Breeze to any amendments that would: 1) reduce deposits to the sinking fund below amounts sufficient to pay amounts due; 2) impair the security for the bonds of the priority of the Lien for the Pledged Funds or; 3) adversely affect the Authority’s receipt of sufficient Pledge Revenues to make required principal and interest payments.
Due to current market conditions, there is an opportunity to terminate the swaps and restructure the Gulf Breeze loan and potentially lock-in significant economic benefits. If authorized, GOAA staff will terminate the Aviation Authority/Goldman Sachs Swap and the City of Gulf Breeze will terminate the Gulf Breeze/J.P. Morgan Swap simultaneously. Gulf Breeze will transfer the termination payment to the Series 1997B redemption account for the benefit of, and use by, GOAA. GOAA could draw on an existing line of credit or utilize other funding sources to pay for the termination of the Goldman Sachs Swap. Shortly thereafter, GOAA will issue long-term fixed rate bonds to pay off the Gulf Breeze Loan and the City of Gulf Breeze will in turn, redeem the underlying Series 1997B Bonds.
The provisions of the Authorizing Resolution for the 1997B Bonds and the Goldman Sachs Swap documents impede GOAA’s ability to implement the proposed subordinated debt revisions to the Airport Facilities Revenue Bond Resolution (the “Senior Lien Bond Resolution”). Those impediments can be eliminated by paying off the Gulf Breeze loan, redeeming the 1997B Bonds, terminating the Goldman Sachs Swap and issuing new fixed rate bonds. Under current market conditions, GOAA can achieve significant savings by executing this restructuring.
GOAA is seeking the City's approval of the termination of the interest rate swaps as detailed in the attached GOAA memo. |