Tuesday, August 05, 2008

refi followup

If that wasn't enough. So here is the deal and it's interesting. Speaking of Tom Murphy even, everything and everything is related in Pittsburgh.

The real story in all of this is that the bonds the city wants to refinance must be the bonds issued in 1998 during the Murphy years via what was then pretty unprecedented internet auction. Remember the days of B2B hype and Freemarkets and a local company called MuniAuction (now named Grant Street) that was pioneering selling bonds on the internet and not via traditional means. Great idea, but before its time back then if nothing else; this particular Pittsburgh bond was actually the firms first municipal bond auction on the internet. The problem was (is?) that the folks who need to buy the bonds are also folks who would lose out on fees over the long haul if the bond market evolved this way. But that is a big topic....

The problem with this particular deal in 1998 was that even though the city said it saved several hundred thousand dollars on fees at the time, the insider talk was that the actual interest rate that the internet auction produced not as good as could have been had normally at that time. The bonds were also issued mostly uncallable for years. Or at least some of it was uncallable forever and some were callable only with the September 2008 payment onward. So this particular refi is happening, if it happens, at the very first moment this particular debt could be refunded. That makes a lot of sense since otherwise it would have been refunded in one of the past refi's when the savings captured would have been higher. Whether or not the current interest rates and insurance costs will justify it right now is a close call. If it is correct that these being the same bonds in 1998, what I saw in the Trib with some criticism that these bonds were not refunded earlier in the year may be a bit unfair in that I am not quite sure they could have been refunded earlier than they are going to be at this point. Timing the market this week or that week for things like this is about as problematic as trying to time the stock market.


Anonymous Anonymous said...

Just idle curiosity that I probably won't have time to check on, but I wonder if the list of people selling bonds (and bond insurance, etc.) and the list of campaign donors has any intersection. Or is that just the turnpike.

Wednesday, August 06, 2008 12:40:00 AM  
Blogger C. Briem said...

the interaction of bond-world and politics is pretty much ubiquitous across the country. Nothing unique about PA.

Wednesday, August 06, 2008 8:27:00 AM  
Anonymous Anonymous said...

These bonds are the 1998 D bonds and are callable effective September 2008. They could have easily been refinanced within 90 days of Sebtember 1st and with very little trouble a deal could ahve been done anytime this year. (probably for better proceeds to the city)

Thursday, August 07, 2008 10:17:00 AM  
Blogger C. Briem said...

or worse proceeds if interest rates moved the other way right? Again, I just say arguing that there was a better rate one week vs. another is not something worth arguing about. I don't think there are any great interest rate prognosticators Downtown who have such precise predictions. Sounds to me the issue was mostly one of communications with council in which doing more work earlier on might have helped. That interest rates have moved in the short term out of the range justifying this deal would be the vagaries of the market. If not worth doing, there is no reason these can't be called in the future.

Thursday, August 07, 2008 10:30:00 AM  

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