New Castle News

July 17, 2013

Council approves refinancing loan

By Staff
New Castle News

NEW CASTLE — New Castle City Council could save about $150,000 by borrowing up to $4 million to pay off debt.

Council approved the borrowing Tuesday at a special meeting, after appointing Boenning and Scattergood Inc. as financial adviser.

Investment banker Joseph Muscatello with Boenning and Scattergood, explained council had been prepared in May to refinance a 2004 bond issue. This was delayed because of a poor bond market. At that time, he said, interest rates jumped from 2.1 to 2.5 percent in three days.

Tuesday’s action involved obtaining a low-interest loan, negotiated by Muscatello through First Niagara Bank. He said the 2.6 percent interest rate has been secured for 12 years, the life of the loan.

He added that unlike with a bond issue, the loan could be repaid early without penalty. Had a bond been secured for the refinancing, he said, the city would not be able to refinance for five years.

He said savings to the city could fluctuate between $147,000 and $152,000 because of several factors associated with the borrowing.

The current outstanding amount on the 2004 bond issue is a principal of $2,880,000.

The original amount of the issue to cover sewer improvements was $4,145,000.

Muscatello said the action taken by the city does not extend the term of the bond issue, which runs through 2024, nor does it increase the annual debt service payment.