FF school bond sale goes as expected
Published Tuesday, June 26, 2007
The Fergus Falls School Board approved the $32.5 million sale of general obligation school building bonds to CitiGroup Monday. CitiGroup outbid four other financial institutions with a true interest calculation of 4.56, about what board members and their finance advisory service, Springsted Inc., had expected.
“We were anticipating a premium bid and we did get a premium bid,” said Don Lifto, a Springsted representative who spoke to the board at Monday’s meeting.
As Lifto explained, a premium bid takes into account future fluctuations in the market, protecting the bidder against rising interest rates and devalued bonds. In return for this protection, the bidder pays the seller additional cash.
“In your case,” Lifto told the board, “the combination of the premium and the unused discount from (CitiGroup) totals around $750,000.”
This money can be used by the district to reduce debt or start projects.
Lifto also outlined different options for how to invest construction funds before payment of contractors begins. He recommended a guaranteed investment contract, which Business Manager Mark Masten likened to a large scale certificate of deposit.
“Instead of a bank being involved it’s usually a very large financial institution,” he said. “With a guaranteed investment contract, you can get your money the next day.”
Masten said the proceeds from the bond sale will be received in about 40 days.
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