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Home My WebLink AboutR25-Redevelopment Agency 1__.",..,. (J , , ",. I... ,....., ~ D~BLOPMBlIT DBPARTHlfT OF TIIB CITY OF SAIl IlBUARDllIO RBOUBST FOR COIRISSIOlf/COUlICIL ACTIOlf From: KENNETH J. HENDERSON Executive Director Subject: CITY BALL FIlIAlICIlIG COlU'IlIIIIlIG LETrBR OF CREDIT Date: July 29, 1992 ------------------------------------------------------------------------------- SvnoDsis of Previous Commission/Council/Committee Action(s): On April 6, 1992, the Mayor and Common Council and the Community Development Commission approved the refinancing of City Hall and the transfer of the Convention Center to the City. ------------------------------------------------------------------------------- Recommended IIotion(s): (Co_itv Develooment Cn..ission) MOTIOlf: That the Community Devlopment Commission (i) approve and authorize execution of the attached commitment letter and further, (ii) authorize execution of final confirming letter of credit documents when the same are available and (iii) authorize staff to pursue the obtaining substitute of a letter of credit from a bank having the highest credit rating. ~~~~lf Executive Director Administrator ------------------------------------------------------------------------------- Contact person(s): Ken Henderson Phone: 5081 Project Area(s): Central Citv (CC) Ward(s): One (1) Supporting Data Attached: Staff Reoort: Attachment FUNDING REQUIREMENTS: Amount: $ 84.000 Source: Tax Increment Budget Authority: PreviouslY Established ------------------------------------------------------------------------------- Commission/Council lfotes: ------------------------------------------------------------------------------- KJH:lag:0935E COIRISSIOlf IIDTIlIG AGDDA Meeting Date: 8/3/1992 Agenda Itell l'haber: d- ~ 1__.. f' " " ,", .... I ... DB~BLOPMBwr DBPARr;{Wr OF TIIB CIn OF SAW BDlWIDlWO srAFF IlBPORt' Citv Ball Fin.no:ina Confiraina Letter of Credit On March 30, 1992, the Agency issued the $12,000,000 Redevelopment Agency of the City of San Bernardino, Certificates of Participation (Series 1992) evidencing proportionate interests of the owners thereof in lease payments to be made by the City of San Bernardino, California (the "COPs") to provide for the refinancing of the City Hall and to transfer the Convention Center to the City free and clear of any financing obligations. In an effort to afford the City the most favorable interest rates, the COPs were structured as variable rate obligations with a 10-year anticipated maturity date and with interest only payments required to be made to the holders of the COPs. The COP had an initial interest rate of 3.74~ and currently pays 2.2~ based upon the security of a letter of credit from The Sumitomo Trust and Banking Company, Limited ("Sumitomo Trust"). The letter of credit cost is an additional .7~ per year. As a result of a rating agency downgrade of Sumitomo Trust, the holders of the COPs are requesting a confirming letter of credit from a financially stronger bank such as The Sumitomo Bank, Ltd. If the confirming letter of credit is not obtained, the holders of the COPs will "put" the COPs back to the Trustee as they are entitled to do under the Trust Indenture. The COPs would then be remarketed at an interest rate of .5~ to .7~ above what rate they could be remarketed had the COPs been secured by the highest rated letter of credit. The additional cost of the confirming letter of produce a more advantageous overall rate to the than if the COPs were remarketed with less than effect. credit would still City and the Agency the highest rating in NO CONFIRMING LETTER OF CREDIT WITH CONFIRMING LETTER OF CREDIT Interest Rate Letter of Credit Confirming LIC 2.9~ .7 -0- 3.6~ 2.2~ .7 ~ 3.2~ ------------------------------------------------------------------------------- KJH:lag:0935E COIWISSIOW ImBTIlIG AGDDA Meeting Date: 8/3/1992 Agenda lte. w-ber: ~,)' 1_._... ~. " ". , - ( .... DEVELOPMDr DBP~TAFF IlBPORT City Hall FiDanciDg ConfindDg Letter of Credit July 29, 1992 Page I!f1JIIber -2- ,~ ...." Attached is a commitment letter from The Sumitomo Bank, Ltd., outlining the costs to the Redevelopment Agency and the responsibilities of Sumitomo. A fee of $12,402, is payable by the Redevelopment Agency upon execution of the commitment letter and the .3% per year letter of credit fee is payable quarterly in arrears plus the reasonable Sumitomo attorney fees of approximately $10,000 to $15,000 required to prepare final documentation whether or not the Redevelopment Agency approves said documents. This documentation will be submitted in draft form to the Community Development Commission for approval on August 3, 1992, and this added letter of credit cost could be structured as an obligation solely of the Redevelopment Agency which would not be intended to be paid by City under the Lease Agreement. The Redevelopment Agency has the ability to terminate the existiDg downgraded letter of credit from Sumitomo Trust and replace it entirely with the Sumitomo Bank letter of credit. The confirming letter of credit can be effectively in place within seven (7) to ten (10) days to avoid a "put" of the COPs. Sumitomo Bank has indicated a desire to provide the long term credit support for the COPs at the highest credit rating available for the original .7% letter of credit fee if the Redevelopment Agency seeks to terminate the downgraded Sumitomo Trust letter of credit. The origination fees paid to Sumitomo Bank for the confirming letter of credit will be applied towards the fees required for the long term letter of credit which will require forty-five (45) to sixty (60) days to obtain. It is staff's recommendation that (i) the Commission approve and authorize execution of the attached commitment letter and further authorize execution of final confirming letter of credit documents when the same are available and (ii) authorize staff to pursue the obtaining of a substitute letter of credit from a bank having the highest credit ratiDg. Staff recommends adoption of the form motions. ~~~~ksOlf' Executive Director Developaent Depare.ent ------------------------------------------------------------------------------- KJH:lag:0935E COIIIISSIOlf IIBBTIBG AGDDA lIeetiDg Date: 813/1992 Aaeuda Itea lIlaber: <-.-::<c;- 1.--........ T~ane ,1121 .'.0525 FaJl c3131.1..... ,.... '-' '-' TIn: SllMJ'l'OMO BANK. LTD. CHICACIO ."ANCH 23a SOulI'l w_... Dfi.., Su~ 7117 ChiC"llQ. /IIinoia ~ !!11t U.SA -- c~ .Ae&'...: SU"""Nn" CI'h;.,. Te_ ""6.. 71.05010 ,.... NlI 25.~73'" . (. . .July 24, 19'2 Mr. '1'1111 stelnhOUH Eoon~.i~ D~lapmen~ Di~~or Redevelopment AgenCf or ~. city o~ San Bernarttlno 201 North Ii 'UNt. San Bernardino, CA 92401 Ra; $U,OOO,OOO Jtu.".lopMnt "',engy Cl:r tb. City or San ~.lnCl, Ceniric:at.. o~ PAJ:tlclpauon (-.r.l... 1992) Jrvidenc;b19 ~oportionat. :rnttn:'..te Of the own.r. 'Z'bereo:r in :.-.. PaY1Dent.. 'to be Ka4e IJy t.h. city o~ Ian Ba~r41no, california " " Dear~. It.e1McnaNI ~t: to our J.nviut.lon tl'OIII MUler . Scbroe4er Financlal, Inc., wa .- pl.a.e4 to ~_. Ow:' in~__t ln, and to ."'batt ClUl' .,...i~nt ror, the i..Wlnce ot ~ .ank'. Cont1QinC) lAtter of cre4:1.t, whl.u:. .,Ul IJI1pport:; tbe abov. re~e"nc:ecI ..rl_ ot tax .x~ vari.~l. rate certificate. ot Participation issued by the !ladevelopaent Agenoy o~ t:.h. City ot San "r~r41.no C.RElA.) in 1912. The bOII4 i..",. -. crecUt enbam:1Id ~ an :En.YOCla~le D1Z'tICt Pay t.etteZ' ot Cre41t (WL/CW) frOlll '1'11. lhmlto.o Trust aM 8&nJc111lJ COIIp&ny, Li_it.M, act.1ftlJ ~OUfJb ita II., YorJc Branda, C:urJ:'en~ly, due to the rating 40WDfJrad. o~ lIwIitOllO Tru.t, the !)onCUlolc1er. are reque8t1ng a COl'ifirain,r LIe troa a financially ~onger Bank. C!v_ the ,-v., v. would like to propo.. ~ rel1_ing= 8T1MM'& -Dy oy 'I"II'InW (1) ~.",ilit:y; eont'b"ll1tf Let~ ot crecUt (2) Bor.aw_Y"'; The ....ltoao ~ and "nll:ill9 COIIpeD)', LaU. 1 .,..' I"" -----W/~;.i. ---. Ugela~.s191 D.l. coo Q.L 1 .~ Q.Q1lif1!1 loDl:l llll> 191 <:66i/l'l:/lS d.j--' 1-.-..,.. (, fI" -.., .. ... (J) AlIiaun~1 -. ....... .-..... ......" $12.402,411 $12,000,000 . 40a.411 TO'l'AL Prine1.,.1 :!nUr..~ Ct) (!(Sit J..8U:.~ And Final Borrawar: (5) Pur~: (6) 'lUll: 'II (7) ZUla: A8d.V.1opaen~ Afenoy of the City or San Bel:nud1lla i) To .up~t. tbe 18.~ tilJe lfMJIp~ va~1.~1. r.~. eo.., ~ "'.0."- 0' vbJ.ah _~e U.ad tIy the BA to f'inanoe f:he .cq\li.1t~on flf cen:a1n ~ap.rty ",.LUlla Llw u.LLy l1alc. of $411 ~d1no. 11) '1'0 provlu 'the bondholder. ad41t10M1 .ecvlty in addUion to 'the CUl'l'9nt. 8\11111:0lIO TrulJt Lie. 1Xp~1"9 on Hal'ob 1, 1~97 i) h_" 1'-. 0.10t 11.'\;, pG,.~l. on execm~loD ot th. ~~.Ltment. Ii) ...........ft .-: 0.:10' P'." ~y.bl. qIlartet'lY in U'Z'ear.. Hl) bDaft... All re..onabl. out.of pogket coata and AJIIlena.. C1nclWS11l9 1",1 ~_a), ~dl..a ot VMt;bv t:b. tia&na1Jl9 ia Qecu~, iDc:un:ecI ill oonnaat:1cm ,,1U! ~. JlreJlU'at1on, e1leCut:lon and tlIe cle11vary t4 'the a.M'a d~u "ill be .,.14 by tba 8On'_... (8) PGt:~n~J..l Dr...,illa.. .. "'.". ..~.- A I'~ tor dI'_~ wl11 onul' DI1J.y 1n thII e.a.. or & 4~Ul9 ot . dI'."lftIJ r..-.t by "1~ 'trust. a ~.d "Sln8l'et9f IlL WO w., '>Nl8 I;IoQJ,IIof15 lG::I l/1li'1'1 e&&l...../JJlI dJ~ 1-....... C: i ". " ... (... I"" '-' ,e"-~_ ......", <" %nt:.r..'If Ra~.: a) Rs- --I 'l'ha ~loa~incJ rate, wb.1.ch v:l:n change wMJU~, to - det&:t1IIt""" by u.. ....rk.t:tlllJ A9~t. ~) 1'.... n..f'aul": PZ'I._ plu 2. p... (10) ..eu~it;y: LlC h'_ -'-U- Tru~ Th. Sl.Ul1tOllCl '1'r~st LIe: is irrevocable in "at.~.t -114 1. 4\1. a.ncI paYable lIpOn any lI'eqq..t. t=- prine1,.1 and int.IC'..~ payaente "0.& to the Trut... S\w.1tOllO ~ ba. a. .1u .ecUZO.lty . .0&'1:lJ&98 em the ~ope:rt.i_ r.Lnaft0e4, In tM aVeM that. S1DIitomo Trust 41.ho~s a clra1f1n9 raQ\l-.t, tbi. -aw:-it:,. shall ~ transrerrec:l to '1'he 'W.1tClllO BeIIJc, Lialtect. (ll) T^~ n.-_........mu-......"yQl: '1111. ~~ Ilbent: w111 - s@1ect 'to ~.t.at:1on, execution &nit deUvery ot loan dOOQlentation liAicll. WOllld cOht:a1ft the JlOntal conditIons pr.".un't, repr...nt:at:1Oba IlIl.d warrantJ..., event. ot clefalllt and. ooven&nu taalUdlng, but not: lillit:ec:l to, cIa_.s coved"", any ..--I'Ve requir~ Ud increlUed oo.t. to the Ittndvs. ~!t:~~I~~~~~ w. laolC foatard 1:0 worJc1"", with YQQ 011 tilt. exeJ.t:1ng prOj.ct. u there ar. any lIUUtiona, pl.... do nR heait:&te to c:ont.ac1: PaUl R. Olson, Yl_ Pa:..lden~ at. (312) ."-'.:'1, . J SliI/Wl. d U~T8KT'iT OJ. CDi) (ll1 '>N:llIlJolO.i.llflj IGI::I ''''91 ~T~Ul d__) 1_- c: ' tfI" ,,", ",. I.. ......... - '.--..... c ...... - To iJ1I4iea1:.e 1'OlIr accapu- or tbl. coal~e, 1'1.... .lgn 01\ tile 8Jl6ce 1Micatad _1ow. .Y yo~ elpatlU'., _ W\deZ'ftarld ~e Y01l c-.it UI pnlcee4 vl~ the dDC1laeJlU1:1cm or the YU_ctl_ and &91'_ to pay tor aftY' aIleS aU ..,.,.._ ot tb. t;&-an_c:t.lon. Very t:ruly your., '1'M IlIIIitou Buk LiaitlllS ~ ...... ~- P.t. ,. Scb~~ - San.1_ Vic. ft..id.nt Aoocp~ tbio day ot JulY, 1~'2 - T~. SteUlbou.. C!CI: Ji. :Z:~8On, ~ <:vm1ally , M111er , Schx'oelll... r!nene1.1, ZIlCI. ~. . ~'M t ,,,,.,'I'^"'-......... _. c~j