PORT OF LOS ANGELES REFUNDS BONDS TO SAVE $16.5 MILLION
OVER NEXT 15 YEARS
SAN PEDRO, Calif. — July 14, 2011 — The Port of Los Angeles has successfully refunded its $101.1 million 2001 Series A and B bonds, generating interest expense savings of approximately $16.5 million, or an average of $1.1 million annually, for the Port over the next 15 years.
“Because of the prudent and careful planning of the Port’s financial team and its advisors, we were able to use the bond refunding process to take advantage of current, historically-low interest rates,” said Harbor Commission President Cindy Miscikowski. “That translated into significant costs savings for the Port.”
Bond refunding is the process by which new bonds are issued at lower interest rates to replace higher interest rate bonds that are currently outstanding. In doing so, the issuer achieves significant cost savings.
Anticipating the arrival of the call date of the bonds, the Port’s financial staff and its advisory team began to explore bond refunding late last year. In May, the Los Angeles Board of Harbor Commissioners approved the Port’s proposal to refund the existing Series 2001 bonds and issue 2011 Series A and B bonds. The Los Angeles City Council and Los Angeles Mayor Villaraigosa approved the measure last month.
The Port of Los Angeles, which maintains an “AA” bond rating – the highest of any U.S. port without taxing authority, issues bonds to finance capital improvements. The bonds refunded this month were initially issued by the Port in 1995, in part to pay for capital improvements at Piers 300 and 400. These bonds were refunded in 2001 with a 10-year “call” option.
The $101.1 million in refunded bonds, which have a final maturity in 2026, represents approximately 11 percent of the Port’s total $880 million in bonded debt. Under the Port’s debt policy, the Port can refund its bonded debt if a savings of 3 percent or more can be realized. The savings from the July bond transaction far exceeded that threshold.
The Port of Los Angeles is America’s premier port and has a strong commitment to developing innovative strategic and sustainable operations that benefit the economy as well as the quality of life for the region and the nation it serves. As the leading seaport in North America in terms of shipping container volume and cargo value, the Port generates more than 830,000 regional jobs and $35 billion in annual wages and tax revenues. A proprietary department of the City of Los Angeles, the Port is self-supporting and does not receive taxpayer dollars.
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