Convention Center Bonds Sold

May 20, 2002
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GRAND RAPIDS—The bond package sold in less than five business days, quite a sales feat considering that a slew of municipal offerings were in the market.

About $84.6 million worth of capital appreciation, or zero coupon, bonds and current-interest securities issued by the City-County Building Authority were sold between Nov. 28 and Dec. 4. The funds from the sale will be used to offset the construction costs of DeVos Place, the new convention facility that will open in two years.

“I think it was a successful sale. We were delighted with the level of interest from retail and institutional investors, particularly given the large supply of municipal bonds in the market,” said Thomas Coomes, first vice president with UBS PaineWebber Inc. in Chicago.

UBS PaineWebber directed the sale, which was co-managed by Banc One Capital Markets Inc., Standard Capital Markets, Tucker Anthony Inc. and Robert W. Baird & Co.  Coomes served as the investment banker for the local bond issue.

The package had two offerings. About $52 million went to market as 30-year capital appreciation bonds, mostly targeted at institutional buyers, and around $33 million worth were marketed as current-interest bonds that reach full maturity in a dozen years. The short-term bonds were largely aimed at retail buyers.

Coomes said investors in West Michigan purchased nearly 10 percent of the issue. Local buyers bought $7.55 million worth of zero-coupon and current-interest securities. He added that retail buyers showed an interest in the capital appreciation bonds because they saw these as being good investments for their children’s college funds.

Institutional investors, of course, such as mutual funds, bought the biggest share of the package. Coomes said that UBS PaineWebber underwrote $30 million worth of bonds and sold those to their customers.

“The market was particularly heavy with municipal supply that week. So in order to protect the Building Authority from exposure to interest rates, we underwrote approximately $30 million of the bonds,” said Coomes. “I think, by now, those have all been sold. Usually we sell it pretty quickly afterwards through our retail system or in the secondary market.”

Yields for the current-interest securities range from 1.93 percent in 2002 to 4.69 percent in 2014, while those for the longer-term capital appreciation bonds range from 5.15 percent in 2015 to 5.59 percent in 2031.

The bonds are backed by revenue received from the Kent County lodging excise tax, a levy that county commissioners extended until 2032 last month. The package went to market carrying the county’s triple A rating, a genuine plus for the sales effort.

“This issue basically, competed, against other bond issues and it did quite well,” said Coomes. “The county’s triple A credit rating greatly facilitated their entry into the capitol markets.”

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