[quote=ucodegen]Unfreaking believable. For a 105mil bond to turn into 981mil would require an interest rate over 10% on a gov bond. No wonder there is a no-refinance clause in the bond. The bond issuers got the city by the gills and doesn’t want to let go. The City of Poway should look into whether there was any conflict of interest on any of the advising parties.
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Yup, if this was a zero coupon 40-year bond it would yield about 5.75%, but… if you start straight-lining the interest and principal payments (just to simplify) beginning on the 20th year, you get a rate just north of 10%. So these muppets got their faces ripped off.
If Uncle Sam can borrow for 30 years at 3% you’d think that a local government could borrow for 40 years in the 5%-6% range. These folks got horsef*cked. How difficult is it to ask what the assumed all-in yield is on the instrument, and then compare that to other alternatives? Apparently quite difficult.
I’m hoping there’s more to this story that makes it look considerably less moronic.
