BATON ROUGE, La. (AP) -- Louisiana is paying $108 million to get out of a deal that helped rebuild and upgrade the Superdome in New Orleans after Hurricane Katrina, but which resulted in soaring interest costs as the economy soured.
The State Bond Commission received the final details Thursday of the debt refinancing for the Louisiana Stadium and Exposition District, including the termination payment to end the previous arrangement with Bank of America Merrill Lynch.
The LSED is borrowing $361 million to restructure the bond deal from 2006; it became saddled with problems as part of the credit crunch and financial downturn two years later.
"This was the most expensive addition to a domed stadium in the history of America," said state Treasurer John Kennedy, chairman of the Bond Commission. "This was one of the worst deals I've ever seen."
The $108 million termination penalty will be rolled into the refinanced borrowing and paid off over decades with the rest of the debt. The arrangement also settles litigation with Merrill Lynch over how the post-Katrina deal was structured.
Kennedy said the state did its best to clean up a mess, and he said the new bond arrangement will cost the LSED less than the previous deal would have if it continued.
"We got a good deal," Kennedy said.
Under the arrangement pushed after the storm by then-Gov. Kathleen Blanco, the bonds were originally "auction-rate" securities, which were tied to short-term interest rates reset every week.
The LSED, the state agency that oversees the Superdome, used the bonds to refinance debt, fund Dome improvements and provide working capital under the expectation that it would hold down the agency's interest costs.
It did just the opposite.
Interest costs jumped to as high as 12 percent on about $238 million of the bonds, after the market for government securities dried up. The state bought the debt temporarily to force down interest costs that were costing the stadium and exposition district an extra $65,000 per day.
The restructured financing plan, which received final approval in December, is converting the auction rate securities to traditional, fixed interest rate debt.
The bond sale was held this week, with $311 million bought publicly and another $50 million bought by the state. All the borrowing will be paid off by 2039.
The money will be used to buy out most of the state's share of the bond debt, pay the termination penalty, get rid of the floating interest rates and limit debt payment for the stadium and exposition district to about $26 million a year, which the district can afford to pay with its hotel/motel tax proceeds and its other income.
- Bank of America Merrill Lynch
- Merrill Lynch