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Securing Additional Bank Financing in a Capacity Constrained Market description
 challenge Otterbein has three outstanding series of letter of credit enhanced variable rate bond issues with a syndicate of four banks. While U.S. Bank, as the lead bank, provided a bridge loan to begin construction on three new Small House Neighborhoods, Otterbein needed to issue an additional $20 million in debt to refinance the bridge loan and complete construction. Due to the tight lending environment and the existing commitments that the syndicate banks had with Otterbein related to the previous financings, there was uncertainty that members of the existing bank syndicate could secure approval for the full $20 million in additional exposure. As such, Sims and Otterbein worked with U.S. Bank’s syndications team to reach out to new banks to seek the balance of the additional funding required and join the existing bank group. The new banks’ appetites were severely limited due to a few key factors, including: fee levels; availability of additional ancillary business; and overall capacity. solution Ultimately, only two of the four existing banks, U.S. Bank and Fifth Third Bank, were able to increase their participation level for the full $20 million required. In addition to providing the letter of credit on the Series 2009 variable rate bond issue, U.S. Bank replaced Fifth Third as the lead bank on Otterbein’s outstanding Series 1998A and 1998B Bonds due to the decline in Fifth Third’s credit rating which had caused a significant increase in the interest rate on these bonds. The Series 2009 bond issue and the replacement letter of credit on the Series 1998A & B Bonds simultaneously closed on July 16, 2009. Sims placed the Series 2009 Bonds at an initial rate of 0.20%. Additionally, as a result of the U.S Bank replacement letter of credit on the Series 1998A and B Bonds, the average interest rate on these bonds decreased by over 2.25% from the previous weekly remarketing rates. “Otterbein's relationship with Sims has helped us to further our mission of enhancing the quality of life and holistic growth of older persons.”
Jill Hreben |
