Travis County Commissioners Court
May 12, 2009,
Housing Finance Corporation
now let's call to order the Travis County housing finance corporation, one item, consider and take appropriate action regarding proposed gnna certificate sale and optional redemption and payment of the corporation's single family mortgage revenue refunding bonds, series 1997 a.
>> good afternoon, I'm harvey Davis, manager of the corporation.
i'm here with stacy hoston lad patillo, cliff blunt our attorney, similar to a transaction we did in December, just smaller amounts and additionally a transaction that we did in -- in 2004 with -- with our 1994 bonds.
but -- but I'll let stacy explain the proposal that -- that we're asking you to approve.
>> again, stacy houseston of morgan key began.
my colleague couldn't be here with me today.
we appreciate the opportunity to serve as your single family bond underwriter.
as harvey mentioned, this is a bond transaction that you have done before, this is based off your 1997 series bonds.
after 10 years as you may know, after 10 years, the issuer has the right to redeem these bonds, which the bond holders know that this can happen.
so -- so what we've done is we've done analysis on this transaction before, we looked at it last year.
it wasn't the right time, wasn't going to produce any benefits for the hfc, so we looked at it again this year.
given the way things are pricing right now, things are so low, rates are low, the certificates that we have on these bonds can actually get a little bit of a premium for you.
by redeeming these bonds, you could actually get a little cash from this transaction.
and also put an issue to bed, close out these 1997 bonds, what you would be dealing is selling this collar, selling these gnma certificates, liquidating all of the accounts that would pay off the bond holders.
you would be paying off the bond holders and any cash that's left over would go directly to the hfc.
right now we have less than a million of bonds remaining in that transaction.
i think that it's about 952,000 that's remaining in there, so it's not a huge amount, but right around a million.
what we'll be doing, our firm of morgan kegan will be doing is product out these bids for these bonds, for this issue, right now we are estimating between a certain amount of numbers, between a certain amount of pricing that we could get for you, say if we were not able to get that pricing, we would not have to do this transaction, the hfc agency could give us a level of saying here's our level, we don't want to go below this amount, it's not going to make it a huge benefit for you, we don't have to do that.
what we will do is -- is I guess -- ask about 30 to 40 different institutional firms for these bids.
and again like I said if the bid does not come back to what he would like, you don't lose anything.
you can continue with this issue, can continue being out there and being outstanding.
if you all -- would like to add to that.
>> this is very similar to and he owe to a transaction that we did, not the one that we did in December, that was a bit different.
this is like we did one of these in '04, the '94 bonds.
the gnma certificates were sold to pay off the outstanding bonds, therefore clearing them from the ahfc's books and producing cash into the coffers of the hfc.
at this point in time the estimate that they are giving us is where they think the market is right now, it could be around $75,000 or so.
i would think that if it dropped -- dropped much lower than -- than 60 or 50 or whatever level that you would tell me then we could always just say well we refuse the bids and look at it at another time.
>> we did not adopt threshold criteria before.
>> it was a different sort of deal, but you kind of gave us some brackets before, but I would think if the -- if the board here was comfortable with -- with making after this -- the fees and things on this are quite low.
it's such a slow transaction.
if you could net my opinion, 60,000 or more, that 60,000 you have in the treasury of the hfc to use as they see fit.
>> set a rate, set a net --
>> well, that's the necessary that I'm looking at would be 60 or so.
if the bids don't produce that, them I believe -- right now the bonds are called 101.
i think this time next year, is it March?
>> January 1st, I believe.
>> January 1st it would be 100, but the market may not be where it is right now.
so many different factors work together on this.
>> uh-huh.
right.
>> that's where this premium is coming from, right now some of these ginnie mays are selling at 103.
redeem that at 101, that little spread is going to be causing that extra money to be able to pay off the bond holders and provide extra funds for the hfc.
it's a -- somewhat of an order transportation, nothing -- doesn't have tons of bells and whistles, that is a nice thing again like it has been mentioned the hfc has done these transactions before.
morgan keegan has done several recently throughout the country and we have gotten good responses.
>> how many days do we have between when we learn what the Wednesday come in at and we need to make a decision.
>> I think that could just be within a day or so, to my knowledge.
>> wouldn't be outstanding very long because they are based on the current market.
we would have to take a look at it.
that's why setting a floor as -- speaking to Commissioner Eckhardt about setting the floor would be the wise thing to do.
i mean if the market on this particular day when they do the bids brought something higher than 103, you -- you could have 80 or 90,000.
>> why don't we set it at 75?
that way we challenge ourselves, don't we?
>> well, we can, that's the -- any finance professor will tell you if you could work this transaction, clear your books and still walk away with money in your pocket, that you do it.
>> 75 feels a lot better than 60.
last time it was 700,000.
>> well, that -- that was a different kind of transaction than this one.
>> I understand.
>> one of the probability -- what are the probabilities of being able to sell it at 75,000 net?
>> well, right now, what we're assuming, what we have estimated in order to get that $75,000 is a 102.875 price.
that's pretty generous.
that's pretty high.
i think we can get between 01 and 03.
it may not be 75,000, that's what's estimated as that price.
>> actually you have it estimated at 70,000 in your backup.
>> 70.
okay.
>> we thought you all low balled it to give us --
>> so judge based on what you would say about the 75, I would think that's setting the bar giving this market at a level where the highest probability would be that you may not get there.
and then you just wait, wait for another time to do it.
that's your choice.
>> again, good to come back with what you would like, you are not going to be making money that you would like to make on it.
you don't have to do.
you are not going to be losing money by trying it.
>> I think the history has been smaller than what it came out -- the December transaction the estimate was in the $300,000 range, it ended up being significantly higher.
in the 90 -- in the 2004 transaction, the estimate in the backup was 50,000 and the transaction ended up bringing in 95,000.
>> now, is your fee based on the amount that -- of the return?
or the
>> [indiscernible]
>> the fees are in the backup.
>> they are.
just looking for them.
>> we see them.
last page.
exhibit a.
>> if we were to set the -- the threshold at 75, and don't make it now, what -- what is the likelihood, I know you can't forecast the market, are we going to miss an opportunity that we might not likely get again or is it cyclical.
>> after the last 12 months I couldn't tell you.
the economist that I work with said if you feel like predicting rates, just go lie down until the feeling goes away.
>> okay.
>> if he set it at 75 and we -- the bids didn't come in at 75, we wanted to do it over again we would have to come back to the board and ask you to -- to review the whole transaction again.
>> move that we set it at 75, we authorize mr.
davis to set an amount on behalf of the court of -- of 65,000 if that's the best we can do.
>> second.
>> I'm trying to be mindful of the fact that we may have to give our final answer within minutes rather than a week.
>> right.
>> so if -- do you accept this assignment is this that's a lot of responsibility on your shoulders.
you are dropping a little bit right now.
dropping.
>> yes, sir, I can handle it.
>> that way we can have our kick and eat it, too, to the extent that it can be done.
>> since I'll be on the phone with them, let me understand that the minimum is 65 is what you are saying.
>> right.
>> that or better to execute the transaction.
>> our goal is 75.
but if the 75 is not there, then y'all have a chance to get together and accept as low as 65.
>> got it.
where he can get a report back next -- we can get a report back next Tuesday, right?
>> if we execute it, it will be executed before that.
i think the plan is to do the transaction on may 19th.
>> okay.
next Tuesday.
>> okay.
that's the motion and a second, any discussion?
all in favor?
that passes by unanimous vote.
thank you all very much.
>> thank you very much.
all in favor?
that passes by unanimous vote, also.
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Last Modified:
Tuesday, May 12, 2009 2:30 PM