Louisiana will pay $108 million to get out of a bond deal that helped pay for repairs and upgrades to the Mercedes-Benz Superdome after Hurricane Katrina but whose costs ballooned when the market for those bonds imploded. The refinancing is tied to a $9 million settlement with Merrill Lynch, which structured the original bond deal, and should put the...
Louisiana will pay $108 million to get out of a bond deal that helped pay for repairs and upgrades to the Mercedes-Benz Superdome after Hurricane Katrina but whose costs ballooned when the market for those bonds imploded. The refinancing is tied to a $9 million settlement with Merrill Lynch, which structured the original bond deal, and should put the Louisiana Stadium and Exposition District on more stable footing to pay off its debts without assistance from state coffers, officials told the State Bond Commission Thursday.
State Treasurer John Kennedy.
The $361 million deal will allow the district to pay off the $233 million in bonds, known as "auction-rate securities," that the state purchased when the market for the bonds collapsed in 2008. The total amount of the new bond sale includes termination fees put in place when the bonds were originally issued in 2006, State Bond Commission Director Whit Kling said.
State Treasurer John Kennedy said the deal would benefit the state by taking the bonds off of unstable, variable interest rates that shot up to about 12 percent. The new bonds will have a fixed rate below 3.4 percent.
"We lost less than we could have," Kennedy said.
The stadium district, which oversees the Superdome and other state-owned sports facilities, will pay about $23 million a year under the new bond deal. Superdome officials said Wednesday those payments are now $26 million a year, though they are still working to determine the total savings offered by the new, stable interest rate.
The state will continue to hold $50 million worth of bonds as part of the deal. The rest of the money that goes to the state will be reinvested, according to the Treasurer's Office.
The deal also settles a lawsuit filed by the stadium district against Merrill Lynch, which set up the original bonds and ran the market on which they were sold.
Kennedy, who opposed the deal when it was first proposed by former Gov. Kathleen Blanco, said the deal gets Louisiana out of "one of the worst deals I've seen the state enter into."