Public Finance

Sampson County, North Carolina


The effort was a cost savings initiative which, by shortening the bond repayment period of Sampson County’s USDA loans, had the potential to save the region millions. 

Date: August 30, 2017
Client: Sampson County, North Carolina
Par Amount: $63,990,000
Transaction: Refunding Limited Obligation Bonds, Series 2017
Rating: A1/A
Role: Senior Manager
 

The 2017 Refunding LOBs were unique to North Carolina given the fact that local governments are typically restricted to a 20 year maximum amortization on all non-revenue backed debt. However, in the fall of 2015, Stephens identified a potential savings opportunity for the County by refinancing all of their currently outstanding United States Department of Agriculture (“USDA”) obligations. Sampson County had 10 USDA loans outstanding originally used to finance various school facilities and County buildings with interest rates and maturity dates ranging from 3.75% to 4.75% and 2037 to 2051, respectively. Given the refinancing term fell outside of the state guidelines, we worked with the County, financial advisor and the NC Local Government Commission (the “LGC”) to evaluate the significant debt savings impact this opportunity would have on the County’s taxpayers.  After many months of discussions with related parties, a special approval was granted from the LGC in order to issue the new debt for 30 years. As a result, the longer loans were able to be refinanced without compromising annual cash flow savings. 

Leading up to the sale, Stephens’ underwriting desk recognized a favorable shift in interest rates caused by geopolitical issues relating to North Korea and an increasing investor demand for safe assets such as municipal bonds. Stephens anticipated a premium serial bond structure with discounted terms in 2034, 2043 and 2047 that would ultimately generate $11.48 million in gross savings (approximately $300,000 annually) and a net present value benefit $6.61 million or 9.7% over the refunded par amount. Overall, the annual savings realized are equal to ½ penny on the County’s tax rate.

On the day of the sale, Stephens was able to generate over $260,000,000 in orders for $64,000,000 in bonds. Strong demand allowed for favorable pricing adjustments resulting in a 3 basis point decrease to the true interest cost.

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