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Florida Municipal Refinances Debt

The Florida Municipal Power Agency has entered several interest-rate swaps and was set to tap the bond market last week with a USD245 million multi-tranche offering of floating-rate revenue bonds to pay down existing debt and slash its interest burden. A spokesman in Orlando says the agency hopes to cut its funding bill by some USD5 million annually by refinancing USD250 million of bonds with average coupons of roughly 5%.

The power agency has entered three interest-rate swaps to lock in the financing costs for 63% of the new offering. It will retain its floating-rate exposure on the remainder. The agency executed three of the swaps with Morgan Stanley and another three with Salomon Smith Barney. The swaps have staggered terms to reflect the tenor of the debt and mature on July 1, 2005, 2006 and 2007. In the swaps the agency pays 3.43%, 3.69% and 3.88% and receives the floating-rate coupon on the bond. The bond coupon will be set by a Dutch auction, meaning that the interest-rate will be determined by reoffering the securities at each reset date.

The original bond was issued in July 1992 when the interest-rate environment was far tighter and proceeds were used to help finance the construction of a nuclear generating facility.

Fitch Ratings has assigned the bonds an A minus rating and Moody's Investors Service has rated them A3. The bonds are expected to receive a credit wrap from monoline bond insurer Ambac Insurance. Morgan Stanley, Salomon Smith Barney and A.G. Edwards led the offering.

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