November 17-19, 2004
ITEM 125-2003-R1104 Authorization to Proceed, Series I 2004 Facilities Revenue Refunding Bond Issue; Montana State University
THAT: The Board of Regents of the Montana University System adopts the Bond Resolution for the Series I 2004 Revenue Bonds for Montana State University, and authorizes Montana State University and the Commissioner of Higher Education of the Montana University System to proceed with the issuance of these bonds.
Montana State University
Facilities Revenue Refunding Bonds (not to exceed) $33,500,000
EXPLANATION: 1. This authorization to proceed with the issuance of the Series I 2004 Facilities Revenue Refunding Bonds is subject to final approval by the University and the Commissioner of Higher Education of the Montana University System. This also authorizes the Chair of the Board of Regents, the Commissioner of Higher Education, the President of Montana State University, and the Vice President for Administration and Finance of Montana State University to execute such documents as may be required to consummate the issuance of the Series I 2004 Facilities Revenue Refunding Bonds.
2. Current market conditions have created an opportunity for MSU to realize significant savings in its debt service obligations through the refunding of a significant portion of the Series D 1996 of its bond indenture program.
3. At time of issue the Series D 1996 bonds totaled $44,530,000, and were for both Bozeman and Billings. At Bozeman $27,850,000 of proceeds was used for parking facilities, Fieldhouse renovations, Stadium renovations (Ph I), new student resident halls, information technology infrastructure for student housing, and other general campus improvements. At Billings $16,680,000 of proceeds was used to refund an earlier series of outstanding, higher interest bonds, as well as for parking facilities, family housing, and other general campus improvements.
4. The maximum principal amount of this Traditional Fixed Rate issue will be $33,500,000; the Total All-In interest rate will be no more than 5.25%; and, the PV savings no less than 4.00%.
5. This refunding will result in no new bond proceeds, nor are there any new projects or indenture reserves created. As with the refinancing of a home, savings will be reflected in lower repayment costs over the life of the outstanding bonds.
6. The callable portion of Series D 1996 bonds are first eligible for refunding without a premium on November 15, 2006, or up to 90 days prior to that time. Therefore, the proceeds of the Series I 2004 bond issue will be held in escrow, in an interest bearing account, until such time as the Series D 1996 bonds can be called.
7. The current data for the Series I 2004 bond issue is as follows:
a. Face Value: $31,480,000
b. Anticipated Sale Date: November 23, 2004
c. Anticipated Delivery Date: December 15, 2004
d. Final Maturity: November 15, 2025
e. All-In True Interest Cost: 4.31%
f. Estimated Costs of Issuance: $125,000
g. Underwriter’s Discount: $165,270
h. Bond Insurance Cost: $124,201
i. AAA Insured Credit Rating, with expected underlying ratings of A from Standard & Poor’s and A2 from Moody’s Investor Services.
j. Present Value Savings: Bozeman $1,125,200 (5.50%).
Billings $722,200 (6.85%)
8. Copies of this issues’ draft of the Preliminary Official Statement, Supplemental Indenture, and Escrow Agreement are on file with the Commissioner of Higher Education, and are available at the Board of Regents’ November meeting.
ATTACHMENTS: 1. Interest Rate Sensitivity Analysis Worksheet
2. Series I 2004 Facilities Refunding Revenue Bonds Resolution