1 / 5

Sacramento Transportation Authority Floating Index Amendment Presentation April 9, 2009

Sacramento Transportation Authority Floating Index Amendment Presentation April 9, 2009. PFM Asset Management LLC Two Logan Square, Suite 1600 18th & Arch Streets Philadelphia, PA 19103 (215) 567-6100. Public Financial Management, Inc. 50 California Street Suite 2300

barrett-hall
Download Presentation

Sacramento Transportation Authority Floating Index Amendment Presentation April 9, 2009

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Sacramento Transportation AuthorityFloating Index Amendment PresentationApril 9, 2009 PFM Asset Management LLC Two Logan Square, Suite 1600 18th & Arch Streets Philadelphia, PA 19103 (215) 567-6100 Public Financial Management, Inc.50 California Street Suite 2300 San Francisco, CA 94111 (415) 982-5544

  2. Tax-Exempt Rates High Relative to Taxable Rates • The ratio of tax-exempt to taxable yields remains extremely elevated due to illiquidity in the market for municipal swaps and bonds • e.g. the mid-market 20-yr SIFMA swap rate currently exceeds 96% of 20-year LIBOR

  3. 67% of 3-Mo LIBOR vs. SIFMA Index • The historical average difference between 67%*3-month LIBOR and SIFMA Index equals 7 bps • PFM recommends structuring the swap using 3ML rather than 1ML given depressed level of 1ML (1-month LIBOR is anchored to current Fed Funds target rate of 0.0 – 0.25%)

  4. 3.43% JPM SACTRANS 67%* LIBOR Variable - Rate Variable - Rate Bonds Amend Existing Fixed Payer Swap • Issuers who hedged variable-rate debt using a SIFMA fixed-payer swap can convert the SIFMA floating index received on their swap to a percentage of 3-month LIBOR • In order for the swap to be integrated with the underlying bonds for tax purposes as a “Qualified Hedge,” the floating rate received on the swap must “closely correspond” to the floating rate paid on STA’s tax-exempt bonds (e.g. 67% of LIBOR) • Tax counsel advises that it expects the swap would still be a Qualified Hedge if amended in this fashion • Fair-market adjustment to STA’s fixed swap rate is approximately -95 bps (shown below) Existing Swap Amended Swap

  5. SIFMA Index versus % of LIBOR Basis Swap Benefits Risks

More Related