Agenda - Council - 04/27/2010 - Laserfiche WebLink

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~.ar AUTHORIZE FIRST AMENDMENT TO LOAN AGREEMENT AND FIRST SUPPLEMENTAL INDENTURE OF TRUST FOR HILKENNY LLC/SIGN-ZONE CONDUIT INDUSTRIAL REVENUE BONDS By: Heidi A. Nelson, Deputy City Administrator Background: In June 2005, the City of Ramsey issued its $3,810,000 Variable Rate Demand Industrial Development Revenue Bonds (conduit bonds), Series 2005 (Kilkenny Limited Liability Company Project) (the "Bonds") and loaned the proceeds to Kilkenny Limited Liability Company (the "Borrower"). The Borrower used the proceeds of the Bonds to acquire and renovate a manufacturing facility located at 6400 Bunker Lake Boulevard in the City which is owned by the Borrower and leased to Sign-Zone Inc. In order to provide for a lower the interest rate on and greater security for the Bonds, the Borrower arranged for Associated Bank, National Association ("Associated") to issue a letter of credit to secure the Bonds. The interest rate on the Bonds is determined in the marketplace based upon the credit of Associated. In 2009, as a result of the poor economic conditions, especially for banks, Associated's national overall rating was significantly lowered by Standard and Poor's. Consequently the interest rate on the Bonds increased significantly. As a result, the Borrower and Associated have made arrangements with the Federal Home Loan Bank of Chicago ("FHLBC") to confirm or stand behind Associated's letter of credit. This will result in a significant reduction of interest rate on the Bonds. In order to provide for the FHLBC's confirming letter of credit it is necessary to make changes to the 2005 bond documents and the City, as a party to the bond documents, needs to approve the execution and delivery of those changes which include First Amendment to Loan Agreement and the First Supplemental Indenture of Trust. Closing is expected to occur on May 6. As is required by law, the Bonds are paid solely from amounts paid by the Borrower, Associated or FHLBC under the letter of credit. The Bonds do not constitute debt of the City and are not payable from or a charge upon any funds of the City. No holder of the Bonds shall ever have the right to compel any exercise of the taxing power of the City to pay the Bonds. Staff Recommendation: Staff recommends authorizing Resolution Authorizing Amendments to the documents relating to the $3,810,000 Variable Rate Demand Industrial Development Revenue Bonds, Series 2005 (Kilkenny Limited Liability Company Project). Council Action: Authorize Resolution Authorizing Amendments to the documents relating to the $3,810,000 Variable Rate Demand Industrial Development Revenue Bonds, Series 2005 (Kilkenny Limited Liability Company Project).