Loading...
Dubuque Racing Association Refinancing of DebtMasterpiece on the Mississippi TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Refinancing of Existing DRA Loan DATE: December 1, 2011 Dubuque kard All- America City I 2007 Dubuque Racing Association President and CEO, Jesus Aviles, is requesting approval of the refinancing of the existing Dubuque Racing Association debt at more favorable terms with the same lenders, American Trust and Savings Bank and Dubuque Bank & Trust. I respectfully request Mayor and City Council approval.. Michael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Jesus Aviles, President and CEO, Dubuque Racing Association D v DUBUQUE RACING ASSOCIATION Date: November 30, 2011 To: The Honorable Mayor and City Council Members CC: Michael C. Van Milligen, City Manager From: Jesus M. Aviles, President and CEO / Dubuque Racing Association Issue: Refinancing of Existing DRA Loan As stated in the Third Amendment of the Lease Agreement between the City of Dubuque and the Dubuque Racing Association (DRA), I am formally requesting City approval to amend the loan with American Trust & Savings Bank (DRA's lead bank) and Dubuque Bank & Trust. The impetus to refinance is to take advantage of decreased interest rates, which facilitates a higher distribution amount to the City and charitable organizations than would otherwise occur under the present terms of DRA's debt. The material terms of the current loan, as compared to the proposed terms can be found in the table below. I have included the proposed terms information from American Trust & Savings Bank; the DRA Board of Directors accepted the terms, subject to City Council approval, at its November 22nd board meeting. If you require additional information or further clarification, please contact me. Thank you for your consideration in this matter. T�Q i;iXSLIE CASINO 1855 GREYHOUND PARK RD. DUBUQUE IA 52001 41" 800 - 373 -3647 -49- WWW.MYSTIQUEDBQ.COM Current Terms Proposed Terms Remaining Amortization (Note 1 & Note 2) 9 Years 9 Years Term — Note 1 9 Years 5 Years Term —Note 2 4 Years 5 Years Balance — Note 1 $13,908,070 $11,908,070 Balance — Note 2 (Unainortized, but not drawn) $4,629,682 $6,629,682 Prepay Principal Due in 2012 $1,085,632 $1,085,632 Total - Remaining Balance of Notes $17,452,120 $17,452,120 Interest Rate — Note 1 8.125% 4.75% - 6.75% Interest Rate — Note 2 6.25% - 7.75% 4.00% - 6.00% Projected Interest Savings over 2012 - 2016 N/A $1,971,229 Projected Increase in Payment of Principal N/A 568,717 Break Terms Cost of Existing Note to Refinance N/A $128,224 I have included the proposed terms information from American Trust & Savings Bank; the DRA Board of Directors accepted the terms, subject to City Council approval, at its November 22nd board meeting. If you require additional information or further clarification, please contact me. Thank you for your consideration in this matter. T�Q i;iXSLIE CASINO 1855 GREYHOUND PARK RD. DUBUQUE IA 52001 41" 800 - 373 -3647 -49- WWW.MYSTIQUEDBQ.COM American Trust — Simply better banking' ""'" 895 Main Street P.O. Box 938 Dubuque, Iowa 52004 -0938 563.589.0827 Fax 589.0860 trichter@americantrust.com www. americantrust. com Victoria J. (Toni) Richter Senior Vice President Commercial Banking November 22, 2011 Mr. Jesus Aviles, President & CEO Mr. Roger Hoeger, CFO Mystique P.O. Box 3190 Dubuque, IA 52004 -3190 Dear Jesus and Roger: Thank you for visiting with Wayne and me regarding the rates and terms on the existing financing for the Dubuque Racing Association. As we discussed, the banks are collectively looking at renegotiating the loans. The current balance on the term note is $13,908,070.14. On or about December 1, 2011, it is the intent of the Dubuque Racing Association to prepay the principal portion of the loan that would have customarily been paid over the course of the next year. The note balance as of December 1, 2011, will be reduced to $12,822,438.96, with no principal payments due until December 1, 2012. You have asked for a variable rate on the term debt. We are offering a variable rate loan at Prime + 1% with a floor of 4'/4% and a ceiling of 6 % %. This loan will have a term of five years and will be amortized over nine years. To break the terms of the existing note, the banks will charge a fee equal to one percent of the amount refinanced on the term portion, or $128,224. The terms of the existing note call for a prepayment fee equal to two percent of the outstanding balance, or $279,614. Therefore, the banks are reducing the fee by greater than 50 percent. During our conversations, you also indicated a desire to move additional balances from the term debt financing to the variable balance term loan. The variable balance term loan currently has a commitment of $4,661,777.51. We have agreed to move no more than $2 million of the existing term debt to the variable balance term loan. We will offer the variable balance term loan at a rate equal to Prime with a floor of 4% and a ceiling of 6 %, and the commitment will be amortized over nine years. The note will balloon in five years. It is anticipated that the use on this variable balance term loan will be very limited, but the credit is needed to be available to demonstrate the ability to fund your obligations. American Trust & Savings Bank We will continue to sweep balances from your checking account to and from the amounts outstanding on the variable balance term loan, and will reduce the commitment on a monthly basis. The pricing on this loan is indicative of short-term financing rates. Purpose of Letter: This letter shall not be deemed as evidence of a binding agreement on the part of either the Banks or the Borrower. Important terms may remain to be negotiated, and even if an agreement in principal should be reached on the terms of the financing at a subsequent date, neither party to the financing shall be legally bound until definitive loan documents have been signed by the respective parties. Both banks must obtain approval for this financing consideration prior to issuing a formal commitment. We ask that you maintain the confidential integrity of the terms and conditions contained herein. Sincerely, Victoria J. RI td4 Senior Vice President, AT &SB The terms of this letter are accepted this Dubuque Racing Association By: Waite R. Breckon Senior Vice President, DB &T day of , 2011.