Richard Tortora, president of Capital Markets Advisors LLC, the Town of East Hampton’s financial advisor, said this week that his firm was “delighted” to report that a bond offering made by the town on Monday attracted an extraordinary amount of investor interest.
Eleven different banks and securities firms bid on the town’s $14.51 million in bonds—an inordinately high number that highlighted the demand for the securities, according to Mr. Tortora.
Jefferies LLC of New York won the bid with an offer to purchase all the bonds at an interest cost to the town of 1.80 percent.
Jeffries also will pay the town a $2.26 million premium as part of the deal. The premium is used to reduce the amount of bonds being issued at closing, according to Mr. Tortora. This in turn contributes to lowering the town’s overall long-term indebtedness. The premium, along with the lower than expected interest rate, will add another $380,000 of savings over the nine-year life of the bonds above what was originally projected in January.
The actual dollar savings over the nine-year period is $3.37 million.
“The demand for our bonds was tremendous, which portends well for the future seeing that one thing the rating agencies like Moody’s look for in evaluating our credit is the demand for our debt,” said budget officer Len Bernard. “The results of this sale I am told has produced as much or more interest in a series of bonds than in quite some time. I believe Moody’s analysis for this sale showed its continued faith in town management going forward and that the new administration will keep the town’s financial condition on the improve, and obviously the investment community agrees.”
The bonds, which will restructure debt related to a 2005 bond issuance, will result in a yearly reduction in town debt service costs of $122,000 in 2014 and 2015, then over $400,000 per year from 2016 through 2023 once the full effect of the refinancing is in place.
“The savings generated by this refund bond sale will have a very positive impact on our ability to reduce the town’s total indebtedness and lower the cost of debt service in the future,” said Supervisor Larry Cantwell. “Len Bernard and the finance team deserve credit for their outstanding work improving the town’s financial standing.”