Austin Convention Center Headquarters Hotel

$244,605,000
Austin Convention Enterprises, Inc
Convention Center Hotel Revenue
Revenue Bonds (Original Financing)

 

$260,170,000
Austin Convention Enterprises, Inc
Convention Center Hotel Revenue
Refunding Bonds (Restructuring)

The original capital structure for the financing of the City’s 800-room hotel contemplated the issuance of non-rated bonds for the entire financing and did not include any ongoing financial support from the City. However, due to certain fundamental changes in the capital markets including the demise of the hedge fund Long Term Capital Management and the Russian credit defaults which caused a dramatic shift in investment monies away from the high yield sector, the plan of finance was reengineered. As a result, Robert Swerdling worked closely with the City and its financial advisor to develop an alternative plan of finance for the construction of the City’s convention center hotel which met the criteria of the evolving capital markets at the time.

The negotiations with bond insurers and the sale and marketing of the 2001 Austin bonds were extremely onerous due to minimal municipal financial participation and unstable capital markets. Despite the uncertain market conditions and lack of municipal support, Bob Swerdling, the City and its financial advisor were able to structure a financing that included a sizable subordinate bond that was insured by ZC Specialty, a “AA” rated multi-line non-municipal insurance provider. The final structure included the June 2001 sale of investment grade rated senior debt in the amount of $109 million, AA-rated credit enhanced subordinate debt in the amount of $135 million and the placement of deeply subordinated third tier debt in the amount of $20 million. The City’s financial participation was limited to a $15 million upfront contribution and ongoing governmental financial support for the bonds was not required.

Led by Bob Swerdling, Piper Jaffray maintained a working relationship with the City of Austin and in 2006 completed a refunding of the 2001 bonds. As a part of the scope of services, Bob Swerdling spent a considerable amount of time working with staff and their financial advisor to evaluate various financing options which included both traditional and alternative credit enhancers. As a result of the relationships that were developed during the original financing of the hotel, Bob Swerdling was able to negotiate a $24.0 million cash rebate of the original insurance premium from the bond guarantor (ZC Specialty) for refunding the bonds early. During the refunding process, Bob Swerdling spent a significant amount of time negotiating with the rating agencies, the mono-line bond insurers, the original bond insurer and investors to finalize and market the bonds which were rated and sold with AAA insurance without any municipal participation.