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Measure K Bond Sale Success

In  April, the SJCOG Board authorized the issuance of $210 million in Bond Anticipation Notes (BAN’s) to fund the Measure K Renewal Early Action Program and continued project delivery to complete the current Measure K.  Lehman Brothers and JP Morgan served as co-dealers with Public Financial Management serving as financial advisor and Nossaman, Guthner, Knox and Elliott providing bond counsel services.

The BAN structure was adopted as a result of the mortgage/credit crisis that made it extremely difficult to obtain the necessary letter of credit for the originally planned commercial paper authorization increase.

Under the BAN structure, SJCOG, acting as the San Joaquin County Transportation Authority, issues notes pledging to the note holders that by a specific date, April 1, 2011, SJCOG will issue additional bonds to repay  their principle investment.  In return for the use of the funds,  between now and April 1, 2011, SJCOG will make semi-annual interest payments to the note holders at the rate of 3.18%.  The total interest cost over three years will be $19.4 million.

On May 7, 2008, the BAN’s were priced and orders taken.  The BAN’s were priced at 3.18% in three coupon tranches of 5%, 4% and 3.125%.  The net result of the premiums and discounts is that SJCOG only needed to issue $203,355,000 in bonds to receive $211,089,159.00 in proceeds.  On the morning of the BANs pricing, the robust marketing of Lehman Brothers and JP Morgan generated nearly $428 million in orders which helped to keep the price of the bonds at a minimum.  On May 21, 2008, the transaction closed.

Table of orders and allotments

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