On January 31, 2012, HJ Sims, as financial advisor, supervised the remarketing of $18,790,000 of Methodist Retirement Community’s (“Methodist”) Series 2001 bonds, which were converted from an adjustable interest rate mode to a weekly mode. Sponsored by Aging in America, Inc., Methodist owns and operates an Independent Living Community known as Hertlin House. The community, located in Lake Ronkonkoma, NY, consists of 120 rental independent living units. The startup construction of the community was originally financed by Sims with $20,000,000 of Series 2001 tax exempt bonds. The 2001 bonds were enhanced with a 5-year North Fork Bank N.V. letter of credit. In 2006, North Fork Bank renewed the letter of credit on the outstanding Series 2001 bonds for another 5-year term, and the outstanding bonds were remarketed with a 5-year term.
Capital One Bank acquired North Fork Bank in late 2006. Thus, Methodist and Sims approached Capital One Bank to discuss renewal options. After several negotiations, Capital One Bank agreed to extend the letter of credit and permit the interest rate to be converted to a weekly rate. Given Capital One Bank’s BBB+ credit rating by Standard and Poor’s, however, Methodist could better benefit from the currently low variable rates in the tax-exempt market by wrapping Capital One’s letter of credit with a letter of credit from a higher rated financial institution. Sims was able to secure US Bank as the confirming letter of credit bank. The bonds are rated Aa2/VMIG-1 by Moody’s Investor Services and AA+/A-1+ by Standard and Poor’s. The conversion to variable rate mode, coupled with the confirming letter of credit, enables Methodist to now enjoy a 250 basis point savings in interest.