View Single Post
12-19-2012, 08:12 AM
Registered User
Join Date: Apr 2007
Posts: 2,383
vCash: 500
Originally Posted by davemac1313 View Post
What does that even mean? I'm just a dumb hockey fan, did they sell? does this mean they were able to reduce the debt payment as they hoped?In Killions mysterious conspiracy world, who is the buyer of these bonds and what hold do they now have on the new city council?
I just want to add to what Thomas L wrote for those interested in those mechanics.

"Bid at premium" means the interest rate on the new bonds (5%) is higher than what the market is asking for (3-4%), so investors will pay more than the face value of the bonds (=premium), hence Glendale will be getting $250-275 million for bonds with a face value of $239 million. They can then turn around and buy (call) back bonds that they had previously issued.

The key to understanding where the savings will come from is that Glendale can call back the old bonds by only paying their face value, as opposed to their market value. This feature is common with munis, not so much with corporate bonds.

In other words, the COG can buy back bonds with a total face value of $250-275 million by issuing bonds with a face value of $239 million. At 5%, the actual interest (coupon) rate on those new bonds isn't any lower than the rate on the old bonds (3-6% according to the November 13 workshop papers), but the $11-36 million reduction in face value means the city will pay interest on a lower principal amount for the next 10-20 years, hence the savings.

barneyg is offline