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Copel council authorizes parameterized refunding ordinance, sets minimum savings and TIC ceiling
Summary
Council approved an ordinance delegating bond refunding pricing to staff, setting a minimum present-value savings trigger of 5% and a maximum TIC of 2.75% for refinancing callable 2013 and 2016 certificates of obligation.
The Copel City Council on April 28 authorized a parameterized refinancing of callable 2013 and 2016 combination tax and limited surplus revenue certificates of obligation, delegating final pricing to the city's pricing officers while setting minimum and maximum thresholds for savings and interest.
Jason Hughes of Hilltop Securities, the city's financial adviser, told council the refinance could capture about $310,000 in present-value savings under the assumptions presented but that the exact savings depend on market conditions at pricing. "Whenever we sell debt, we include a call date," Hughes explained, describing how callable issues create an opportunity for tax-exempt refundings when rates permit.
After discussion about fee levels and whether to tighten or loosen the pricing triggers, the council amended the motion and adopted an ordinance that requires a minimum present-value savings of 5% while allowing a maximum true-interest cost of 2.75%. The motion passed on a recorded vote: Council Members Hahosa Smith, Carol Neville, Prim Kumar and Matthew Hill voted in favor; Council Member Carol Neville had spoken in favor earlier and Council Member Neville opposed the revised parameters in debate (the transcript records opposition from Carol Neville and Council Member Neville on parts of the amendments). (Official roll-call and certification are in the adopted ordinance.)
Councilors said they wanted flexibility to execute the refunding if markets provide favorable conditions. Several members noted refinancing costs (underwriters and issuance fees) are unavoidable when issuing new securities and that lower market rates would increase net savings. The council's action delegates final execution to the city manager and director of finance, subject to the adopted parameters.
Staff will return any final pricing and savings calculations required by ordinance procedures to the council after pricing officers approve an actual sale that meets the adopted thresholds.
Outcome: ordinance adopted; staff authorized to proceed to refund the 2013 and 2016 COs if market conditions meet the council's parameters.
