America First Tax Exempt Investors L.P. Announces Funding Of New Secured Credit Facility
OMAHA, Neb., Sept. 2, 2010 (GLOBE NEWSWIRE) -- America First Tax Exempt Investors, L.P. (Nasdaq:ATAX) (the "Company"), announced today that it has entered into a new long-term secured debt financing facility with Freddie Mac utilizing Freddie Mac's Tax-Exempt Bond Securitization or "TEBS" program (the "TEBS Financing"). Proceeds from the TEBS Financing totaled approximately $95.8 million, of which approximately $49.5 million was used to repay the entire outstanding balance due on the Company's secured term loan with Bank of America. After the repayment of the Bank of America loan and the payment of expenses, approximately $40.9 million of net proceeds were received by the Company.
The TEBS Financing is a securitization of 13 of the Company's tax-exempt mortgage revenue bonds (the "Bonds") and essentially provides the Company with a long-term variable rate debt facility at interest rates that will reflect prevailing short-term tax-exempt rates. The effective interest rate to be paid on the TEBS Financing is equal to the weekly Securities Industry and Financial Markets Association ("SIFMA") floating index rate plus certain credit, facility, remarketing and servicing fees (the "Facility Fees"). As of closing, the current SIFMA rate is equal to 0.25% and the total Facility Fees are 1.9% resulting in a total initial cost of borrowing of 2.15%. The Company has also entered into three separate interest rate cap agreements indexed to the SIFMA floating index for a total nominal amount of $95.8 million. These caps limit the Company exposure to increases in the SIFMA base rate to the interest rate caps strike rate of 3.0% per annum. The cap rate plus the Facility Fees result in a maximum potential cost of borrowing on this financing of 4.9% per annum. For financial reporting purposes, the TEBS Financing will be presented as a secured financing.
"The closing of the TEBS Financing is a significant transaction for the Company which will contribute to our ability to meet our strategic objectives," stated Chad Daffer, Fund Manager. "With the closing of the TEBS Financing the Company accomplished the following objectives;
- The Bank of America term loan facility, which was to expire on December 31, 2010, was retired and replaced with a long-term financing thereby addressing refinancing risks associated with the Bank of America loan,
- The Company's cost of borrowing was reduced from an effective rate of approximately 4.25% on the retired Bank of America loan to an initial rate of approximately 2.15% on the TEBS Financing,
- Overall balance sheet leverage was increased to levels in line with targeted leverage for the Company potentially allowing for additional investments and credit spread income, and
- The Company's overall cost of borrowing has been capped, through our hedging strategy, at a rate comparable to rates incurred recently by the Company."
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