Business Services Industry
Niagara Falls City School District to issue $70 million in COPs for new high school
Business Wire, July 14, 1998
NEW YORK--(BUSINESS WIRE)--July 14, 1998--The City School District of the City of Niagara Falls, New York, is planning to price approximately $70 million of innovative tax-exempt Certificates of Participation (COPs) on July 15, for delivery on or about July 23. Proceeds of the issue will fund the construction of a state-of-the-art high school facility with capacity for 2,500 students. The transaction represents the first time a New York school district will finance a school facility with long-term COPs. J.P. Morgan Securities Inc. will be the senior manager for the project; NYMAC will be the financial advisor.
The transaction, with its innovative "lockbox" structure, represents a new way for New York school districts to leverage state aid receivables. Traditionally, New York school districts issue general obligation bonds that count against constitutional debt limits. The COPs, which are being issued pursuant to special state legislation, will have a 30-year maturity and will not count against the district's debt limit, allowing for more flexible financing. In addition, the legislation stipulates that the district will be reimbursed for 83% of its COPs' principal and interest payments in the form of additional state aid and will be exempt from certain contracting requirements.
Moody's and Standard & Poor's, citing the lockbox structure and the 83% state reimbursement, have assigned ratings of Baa3 and BBB-, respectively. These ratings are on par with the district's general obligation bond ratings, despite the fact that the lease payments securing the COPs are subject to annual appropriation by the district. Both rating agencies cited the lockbox mechanism as a reason for the ratings being on par with the general obligation ratings.
Honeywell Inc. will be the district's program manager for the school project, coordinating construction, financing, and ownership activities. The resulting "school of the future" will enable the district to focus on its core business of education. In the past, Honeywell has worked with the district to upgrade its existing building infrastructure and improve energy management.
Special counsel Willkie, Farr & Gallagher and underwriter's counsel Harris & Bar-Levav were instrumental in structuring the COPs.
CONTACT: J.P. Morgan & Co. Incorporated
www.jpmorgan.com
Press contact:
New York: Michael Golden, 212-648-3784
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