Buyer Makes Offer for Series B Bonds

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A Dallas-Texas based investment company, Preston Hollow Investor has made an offer to purchase the Series B bond intended to finance the government bank to be called the Territorial Bank of American Samoa.

This is revealed in documents distributed by the American Samoa Economic Development Authority Board at a hearing yesterday by the Senate Budget and Appropriations Committee.

The focus of the hearing was how the $55 million raised from the sale of the Series A & C bonds are being used.

A report prepared by ASEDA’s financial advisors on the bond sale, Lewis, Young, Robertson & Burningham of Utah shows that Preston Hollow Investor, has provided a proposal to purchase the Series B bonds.

The proposal comes with conditions. Among them that the B series bonds would be on parity or be equal in payment priority and equal in lien upon ASG revenues as the Series A & C bonds.

In other words Preston Hollow wants assurance that ASEDA will pay them the same time they pay investors who purchased the Series A & C bonds.

And in the event of a default, that they will be ranked in the same priority as the only bonds in lien for pledged revenues.

The company is also asking for a 10% reserve fund, about $2 million, which would be released to help make the final payment on the bonds in 2024 and that the B Series bonds have a confirmed Ba3 rating with Moody’s.

Preston Hollow is also seeking a 90% discount which means ASG pays the investment company a fee of $2 million to buy the bonds.

ASEDA’s financial advisors say, when this fee is translated into an additional interest rate component then the true interest cost on the bonds is 13.18%.

The bonds will mature on September 1, 2024 and are also callable on that date.

According to the financial advisors this means ASEDA can refund or refinance the bonds at that time which allows five years to improve the financial position and economic base of the territory and hopefully get a better rating and a better interest rate.

The sale of the Series B bonds is projected to raise $15 million which is to be used to set up the Territorial Bank of American Samoa and the Office of Financial Institution.

A break down of the use of the money:$10 million is basic capital for the bank and $3 million is for start up costs.
$500,0000 is to fund personnel costs for seven employees of the Office of Financial Institution for one year.

Governor Lolo had said in his state of the territory address last week, that the Series B bonds have been taken off the market while alternative financial solutions are explored to set up the charter bank.

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