East Hampton Town awarded the bid for its $14,515,000 refund bonds to Jefferies. LLC of New York, after the global investment banking firm agreed to purchase the bonds at a 1.8 percent interest rate.
The sale, according to Town Budget Officer Len Bernard, will allow the town to pay off its original bonds from 2005, which were at a higher interest rate than the 1.8 percent, ultimately decreasing its indebtedness and debt service. The town was previously paying an interest rate of 4 percent.
“Because you can’t refinance your debt before 10 years of the original bond, you can issue these refund bonds, get a lower interest rate, and save money,” Mr. Bernard said.
Jefferies, LLC will also pay a $2.26 million premium to purchase the bonds, which will allow the town to take on $12,450,000 in bonds, instead of the originally anticipated $14,515,000, Mr. Bernard said.
Between the premium and the lower interest rate, the town will be able to save between $400,000 and $410,000 a year in debt service starting in 2016, he added.
The gross present savings for the town is $3,067,168 and the actual dollar savings are $3,369,593, over the nine-year lifespan of the refund bonds, according to the release. For 2014 and 2015, the town will save about $110,000 until the original bonds are paid off.
Jefferies, LLC was one of 11 banks and security firms to bid on the bonds, according to a press release issued by the Town Supervisor’s office on Monday morning. All of the bids “were within one tenth of 1 percent of the winning bid.”
The level of competition and interest among bidders proves the “new administration will keep the town’s financial condition on the improve,” according to the release, but it will also help the town when making a pitch for a higher credit rating, which would continue to lower the interest rates on the refund bonds, Mr. Bernard said.
The sale will close on April 3.