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DRPA Bond Refinancing to Reduce Long-term Debt-related Costs by $11 Million Annually
A recently completed bond refinancing transaction will save the Delaware River Port Authority more than $11 million a year, DRPA officials announced today.
On Dec. 20 of last year, the DRPA sold $153 million in investment-grade, tax-exempt, refunding bonds with serial maturities from 2014 to 2027 and an option for a 10-year par call. Proceeds from the sale are being used to refund Port District Project Bonds, series 1998B, 1999B and 2001A.
“We’re restructuring our debt now to take advantage of low interest rates,” said DRPA CEO John J. Matheussen. “We expect the bond sale to result in net present value savings of nearly $37 million and annual debt-related savings of more than $11 million – $6 million of which comes from paying down debt. The other $5 million in annual savings comes from the bond refinancing itself.”
The interest rate on the refunded bonds was just under 5.45 percent. The net interest cost of the new bonds is slightly more than 3.4 percent. The total savings to the DRPA is 18.8 percent of the $196 million in redeemed debt, said DRPA Chief Financial Officer John Hanson.
“The typical threshold of success for a transaction of this kind is about 3 percent,” Hanson said. “At close to 20 percent, this deal really hits the ball out of the park for the DRPA.”
Hanson said the new bonds mature more quickly than the redeemed bonds did.
“The average life of the old bonds was 9.5 years,” Hanson said. “Now we’re down to an average of 9.1 years.”
The DRPA is in the middle of a multi-year plan to restructure its long-term debt. Last year, it redeemed almost $96 million in debt securitized as DRPA Revenue Bonds and higher interest Port District Project Bonds. The redemption reduced DRPA debt service by about $2.5 million per month and lowered the authority’s aggregate debt and borrowing costs.
Since December 2011, the DRPA has reduced its aggregate debt by approximately $185 million. As of today, the DRPA has approximately $1.1 billion in outstanding debt.
Late last year, the DRPA Board of Commissioners approved a 2013 annual budget of $257.7 million. Despite a nearly 70 percent jump in employee pension costs, the DRPA and PATCO were able to reduce total annual expenditures, including operating and debt-related expenses, by $17.3 million or 6.3 percent.
The Delaware River Port Authority is a regional transportation agency that connects millions of people and businesses in Pennsylvania and New Jersey. The DRPA owns and operates the PATCO commuter rail line and the Benjamin Franklin, Walt Whitman, Commodore Barry and Betsy Ross toll bridges. The DRPA also owns the RiverLink Ferry.
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