City of Manchester looking at refinancing $19.1M loan
Manchester policy makers have two options on the table to help reduce its debt service by approximately $2 million over the next 17 years.
One option will provide an almost guaranteed $2 million in savings. The other could save the city around $2.6 million, but that option comes with some risk.
C.L. Overman, vice president of Morgan Keegan Co., the city’s financial advisor, presented the Manchester Finance Committee two options Monday night to reduce the debt it owes on a $19.1 million loan the city took in 2003 to help refinance the recreation center, remodel Manchester City Hall, perform fire department improvements and school renovations.
“You’ve already refunded or refinanced the school portion in 2010,” Overman told the finance committee. “Now you have $14.7 million that can be refunded.”
The portion that Overman refers to is eligible to be called – refinanced or paid off – on June 1 of this year. He gave the finance committee two options.
The first option would call for refinancing the entire $14.7 million on June 1 and locking in an interest rate of around 2.6 percent for a non-bank-qualified loan. Overman did add that the rate could be as low as 2.5 percent because his estimates are conservative. The current rate on the loan is 3.99 percent.
“That would save about $2 million over the life of the loan,” explained Overman.
The second option could bring bigger savings to the city but would mean a little more risk as variable rates would be involved.
Overman told the board it could refinance a little under $10 million of the $14.7 million in a bank-qualified loan for an interest rate of approximately $2.222 percent. The board would have to leave the remaining $4.9 million on the books at around 3.99 percent until January 1, 2014.
“You can only use $10 million a year in bank qualified,” said Overman.
The second option could save the city between $2.3-2.6 million between June 1, 2012 and 2030, Overman estimates…
Read the complete story in this week’s (Feb. 13) print edition of the Manchester Times. (Click here to subscribe to the print and/or online edition of the Manchester Times)