Value Delivered:

Seeking to take advantage of historic low municipal bond interest rates, the Oakland Unified School District called on KNN Public Finance to refinance approximately $194 million of the District's outstanding bonds.
   
Strategic Implementation:

Unique among municipal bond issuers, the Oakland Unified School District’s underlying bond ratings are not particularly strong. It is rated “BBB+” by Standard & Poor’s and “Baa2” by Moody’s Investors Service. These ratings are a reflection of the rating agencies’ concerns over the District’s financial difficulties over the past few years, rather than the ability of taxpayers to repay the debt.

To improve the ratings on the bonds, KNN advised the District to purchase bond insurance and bring the ratings to “AAA” and “Aaa”—the highest possible. The cost of the insurance, though more expensive than it would have been with better ratings, was still low enough to make the entire refinancing transaction worthwhile.

KNN assisted the District in selling the bonds through an electronic competitive bidding process. Six underwriting syndicates bid on the refunding bonds and Morgan Stanley was awarded the bonds with the lowest interest rate bid of 4.43%.
   
Results:

The total savings to the District and its taxpayers over the life of the bonds is $15,675,080. On a present value basis, that translates to 5.19% of the prior debt. As a result, taxes for the prior bonds will be reduced for the average taxpayer by approximately $4.36 per year. The District's refinancing represents an ongoing commitment to prudent financial management for the taxpayers who approve, and pay for, the greatly needed school bonds.

KNN Vice President Ruth Alahydoian and Associate Janice Peters provided financial advice to the District for this transaction.