CATEE Conference 2014

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Sara Caldwell
8 years ago
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1 CATEE Conference 2014

2 Agenda Company Overview Discussion Item Two Transaction Participants Add a second line of text here Discussion Energy Services Item Contracts Three Add vs a Performance second line of Contracts text here Discussion MDA Lease Item Program Four Add a second line of text here Different Forms of Contracts Discussion Financing Item Options Five Add a second line of text here Discussion Banks Item vs. Bonds Six Add a second line of text here Discussion Refunding Item Opportunities Seven Add a second line of text here Discussion Disclosure Item Eight Add a second line of text here 5 Discussion Item Four 10 Discussion Item Eight Add a second line of text here Financial Advisor Add a second line of text here

3 Company Overview Established in 1986 Registered broker/dealer and municipal advisor Over $25 billion of transactions Established major presence in capital lease and lease revenue market in 1986 Affiliate lessor, Carlyle Capital Markets Inc. Energy Efficiency for over 24 years Financial Advisor for the Mississippi Development Authority Renewable Energy (Solar, Landfill Gas, Wind, Etc.)

4 Who is Involved Transaction Participants ESCO Equipment installation Lender Provides funding for the transaction Underwriter Sells the bonds Municipality Enters into the lease with the Lender Attorneys Tax Counsel provides a tax opinion (if Tax-Exempt) Validity Counsel validates the lease with the lender

5 Transaction Process RFQ RFQ For ESCOs ESCO Scope of Services Award to ESCO Contract with ESCO Financing Underwriting Award to financier Closing Documentation Legal Review Closing Funding

6 Energy Services Contract vs. Performance Contracts ESL-KT Energy Services Contract Performance Contract Guaranteed Savings Ongoing Management Contract 179-D Energy Efficiency Equipment Capital Improvements Energy Grade Audit Financed by Banks or Bonds

7 MDA Energy Efficiency Lease Program Established in 2012 by FLCO Streamlined Funding process and access to syndicate of regional, local, and national lenders Standard documentation Flexible Financing Assistance with voluntary and mandatory disclosure ESL-KT

8 Different Name Same Transaction Capital Lease Installment Sale Lease Purchase Agreement

9 Financing Options Certificates of Participation (COPs) or Lease Revenue Bonds General Obligations (GOs) Private Placement

10 Lease Revenue Bonds vs. Bank Financing Comparison 11/11/2014 ESL-KT Assumptions: $5,000,000 borrowing 15 year bond term; 15 year bank financing AA Rated, plus 25 bp Rates as of 11/04/14 Scenario 1: Bond Market 15 year term Scenario 2: Bank Financing 15 year term Sources of Funds: Sources of Funds: Par Amount $ 5,064, Lease Amount $ 5,057, Orig Issue Premium 112, Total $ 5,176, Total $ 5,057, Uses of Funds: Uses of Funds: Acquisition Fund Deposit $ 5,000, Acquisition Fund Deposit $ 5,000, Cost of Issuance 176, Cost of Issuance 57, Total $ 5,176, Total $ 5,057, Net Interest Cost (NIC) 2.712% Net Interest Cost (NIC) 2.550% True Interest Cost (TIC) 2.711% True Interest Cost (TIC) 2.550% All Inclusive Interest Cost (AIC) 3.023% All Inclusive Interest Cost (AIC) 2.700% Net Benefit 0.32% Bank Estimated 15 year bid calculation (current rates): 15 year swap rate 2.61% 67% of 15 year rate 1.75% additional bp 0.80% Net Interest Cost 2.55% Total Debt Service Bonds $ 6,259, Total Debt Service Lease $ 6,158, Savings over term of financing $ 100,088.84

11 QECBs ESL-KT

12 15 Year Swap Rate ESL-KT % 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 15 Year Swap Rate 5.47% 5.82% 5.83% 5.19% 5.20% 4.96% 4.29% 4.12% 3.96% 3.28% 2.63% 2.55% Year Swap Rate Downward Trend since 2007 Historically Low Rates Lowered rates since 2010 Expected upward trend in 2015

13 Refunding City of Jackson, MS Jefferson Parish, LA 3 separate capital leases with 3, 5 and 13 years left Streamlined 3 payments to 1 Saved city $600k Originally Performance Contract NPV Savings of 11% Kept Original Term

14 Disclosure April 3, 2012 MSRB asks for Voluntary Disclosure of Privately Placed Leases February 18, 2014 S&P Mandates Private Bank Disclosure

15 Financial Advisor Benefits Obtain Lowest Cost of Financing Analyze Bank vs. Bond Market Standardized Professional Documentation Assist with Disclosure Mandatory Disclosure with S&P and Fitch Voluntary Disclosure to MSRB (If Requested) Broadest Distribution Network of Regional, Local and National Lenders

16 Contact Art Brickey, CFA Preston Road, Suite 515 Dallas, TX

City of Philadelphia Debt Management Policy December 2009

City of Philadelphia Debt Management Policy December 2009 I. INTRODUCTION While the issuance of debt is often an appropriate method of financing capital projects and major equipment acquisition, it needs