A “screw up” on the part of Meadville’s investment bankers will result in a less-than-expected savings when the city refinances bonds issued in 2013, but a reduction in the fees charged by those same bankers will help to soften the disappointment.
“They did a pretty good job in terms of it not being a complete disaster,” City Manager Andy Walker said Monday, “but it was a screw up.”
The plan first presented to City Council in September called for the city to refinance two series of bonds worth $8.4 million and $3.3 million, respectively. Last month, Walker advised council that with lower interest rates available, the city stood to save $152,000.
When officials at Boenning & Scattergood Inc., the Pittsburgh-based law firm that handles bond underwriting for the city, attempted to complete the transaction, it was discovered that the smaller series of bonds was not yet callable, according to Managing Director John McShane. Bonds are callable when they are eligible to be paid off prior to their maturity dates.
An incorrect call date on the documentation for the bonds led to the issue, McShane told council. As a result, only $8.4 million in bonds could be refinanced, which threatened to reduce the city’s expected savings to about $122,000.
In light of confusion, McShane told council, “We went back to everyone involved and asked, ‘We’ve all worked for the city for over a decade now, what can we do to help the city achieve a higher rate of savings?’"
Everyone involved in the transaction agreed to fee reductions of 10 percent or more, McShane said, saving the city an additional $15,000.
The transaction was worthwhile with a savings of $122,000, McShane said, but “We wanted to put the city even in a better position.”
The refinancing is scheduled to close Thursday.
Mike Crowley can be reached at 724-6370 or by email at email@example.com.