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
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All- America City
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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
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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.