District financial adviser says $30 million bond refunding still viable despite volatile market

Scott Shear, a financial consultant with PFM, told the Bethlehem Area School District finance committee on April 14 that the district99s proposed refunding of roughly $30 million in outstanding debt remains achievable but depends on near-term market conditions. "We have just about everything in place to do the refinancing," Shear said, while cautioning that market swings could change the economics overnight.

Shear said the board approved a refunding resolution last month that includes an execution threshold: the district will only proceed if net present-value savings exceed 3 percent. "So roughly on a $30,000,000 transaction, it's about $900,000 of net savings," Shear said. As of his presentation, estimated net savings after issuance costs and any state share were about $1,600,000 (about 5.6 percent), though he said that figure could change to roughly $800,000 to $1,900,000 depending on market movement.

The consultant described a volatile market week leading up to the meeting, during which municipal deals nationwide were pulled and investor demand fluctuated. Still, he said, "the underlying fundamentals of the market are still good" and that the district99s pricing was tentatively scheduled for April with Raymond James and Jamie Montgomery Scott listed as underwriters. A necessary next step, he added, is a reaffirmation of the district99s credit rating by the rating agency before execution.

Board members thanked Shear for the briefing and noted the district retains flexibility to delay the transaction if the market deteriorates. "If we execute, that's great. If we don't, we'll just put [it] on the shelf and no harm, no foul at that point," Shear said.

The administration said it will continue working with the business office, the underwriters and the rating agency and will advise the board in the morning of any decision to price. The resolution giving staff authority to proceed with the refunding remains in force and includes the 3 percent net-savings execution threshold.

Clarifying details discussed at the meeting include the approximate transaction size (~$30 million), the board99s execution threshold (3 percent / roughly $900,000), a present estimate of net savings of about $1.6 million (5.6 percent) as presented by PFM, and the district99s flexibility to delay pricing if investor demand softens.

The finance committee did not take a formal vote at the meeting; the briefing was an update intended to prepare the board and administration for possible pricing in April.

Shear and district staff said they would notify the board and business office as market developments occur and before a final commitment is made.