Introduction to Interest Rate Swaps City of Roseville Roseville, - - PowerPoint PPT Presentation
Introduction to Interest Rate Swaps City of Roseville Roseville, CA Incorporated in 190 9 Placer County Located 15 m iles north of Sacram ento Full Service City Electric - Water Wastewater Garbage Police Fire
Incorporated in 190 9 – Placer County Located 15 m iles north of Sacram ento Full Service City Electric - Water Wastewater – Garbage Police – Fire – Parks – Library Two City-owned Golf Courses Population: 10 4,655 http:/ / www.roseville.ca.us
Type Fixed Variable Synthetic Fixed Electric 93,625,000 60,000,000 115,395,000 Gas Prepay 209,350,000 Water 53,695,000 Wastewater 11,430,000 70,000,000 93,525,000 Golf Course 7,310,000 Public Facilities 16,490,000 Redevelopment 36,405,000 Mello-Roos 402,900,000 Total
$ 8 31,20 5,0 0 0 $ 130 ,0 0 0 ,0 0 0 $ 20 8 ,920 ,0 0 0
Lower costs w/ synthetic product
Diversify debt portfolio
Issue Type of Debt Insurer Counterparty Most Recent Reset Rate 20 0 2 Electric VRDBs FSA Morgan Stanley 1.70% 20 0 5 Electric ARNs FGIC Morgan Stanley & Bear Stearns 6.11% 20 0 5 Electric ARNs FGIC n/ a 6.47% 20 0 0 Wastewater VRDBs FGIC n/ a 7.00% (Held by MS) 20 0 3 Wastewater ARNs FGIC Morgan Stanley 4.08%
0% 2% 4% 6% 8% 10% 12% 7/2005 9/2005 11/2005 1/2006 4/2006 6/2006 8/2006 11/2006 1/2007 3/2007 6/2007 8/2007 10/2007 1/2008 2002 VRDBs 2005 ARS SIFMA
City of Roseville Electric System Variable Rate Debt
0% 2% 4% 6% 8% 10% 12% 7/2005 9/2005 11/2005 1/2006 4/2006 6/2006 8/2006 11/2006 1/2007 3/2007 6/2007 8/2007 10/2007 1/2008 2002 VRDBs 2005 ARS SIFMA
City of Roseville Electric System Variable Rate Debt
0% 2% 4% 6% 8% 10% 12% 7/2005 9/2005 11/2005 1/2006 4/2006 6/2006 8/2006 11/2006 1/2007 3/2007 6/2007 8/2007 10/2007 1/2008 2002 VRDBs 2005 ARS SIFMA
City of Roseville Electric System Variable Rate Debt
0% 2% 4% 6% 8% 10% 12% 7/2005 9/2005 11/2005 1/2006 4/2006 6/2006 8/2006 11/2006 1/2007 3/2007 6/2007 8/2007 10/2007 1/2008 2002 VRDBs 2005 ARS SIFMA
City of Roseville Electric System Variable Rate Debt
Historical Rates 20 0 2 VRDBs 20 0 5 ARS
Rate Spread to SIFMA Rate Spread to SIFMA Current 1.70
6.12 3.79 3-Month Average 2.37
4.87 2.22 1-Yr Average 3.31
3.87 0.45 Average since 2005 3.21
3.28
2005 Electric, Series B
Variable Payment vs. Floating Leg Received 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 6/29/2005 8/29/2005 10/29/2005 12/29/2005 2/28/2006 4/29/2006 6/29/2006 8/29/2006 10/29/2006 12/29/2006 2/28/2007 4/29/2007 6/29/2007 8/29/2007 10/29/2007 12/29/2007 2/29/2008
2005B Electric FGIC ARSs $90m 70.5% 1m LIBOR
Risks
Market disruption Failed auctions High rates
Rewards
Lower rates = $$$ in savings Matching assets and liabilities
More adm inistrative burden
Monitor M-T-M Values Monitor counterparty credit ratings Debt service paym ents Annual swap disclosure
Refunding Issues
Can swap survive a refunding? Possible increased costs