County Explores Bond Refinancing Options to Generate Potential Savings

Will County officials are exploring opportunities to refinance existing debt that could generate significant savings through two separate financial strategies, according to presentations to the Finance Committee on Thursday.

Financial advisors from Wells Fargo and Speer Financial recommended the county consider refinancing bonds originally issued in 2015 and 2016 that become callable in November 2025, as well as pursuing an innovative “tender” approach for bonds issued in 2020.

“The series 2015 and series 2016 have a call date approaching in November of 2025,” explained Brian Leenski, executive director at Wells Fargo. “At that date these bonds can be called and redeemed and refinanced with new bonds.”

Based on current market conditions, refinancing approximately $41 million in bonds from those two series could generate savings through lower interest rates. The refinanced bonds would maintain the same maturity dates as the original debt, with no extension of the repayment period.

The more innovative approach involves a potential tender offer for taxable bonds issued in 2020. Under this strategy, the county would offer to buy back bonds from current holders at a price below face value, then issue new tax-exempt bonds to cover the cost.

“Tender is the holder’s option to sell it back to you,” Leenski explained. “Somebody bought these bonds in 2020 at taxable rates which were extremely low, and they may want to sell those bonds back to you so that they can get the money and then reinvest in a much higher market.”

The 2020 bonds, which refinanced a portion of the county’s 2016 debt at historically low interest rates during the pandemic, could potentially be repurchased at approximately 80 cents on the dollar. Although current interest rates are higher than those on the 2020 bonds, the discount on the repurchase price would generate overall savings.

If approximately 30% of bondholders accepted the tender offer, the county could save an estimated $4.5 million over the remaining life of those bonds, or almost $3 million on a present value basis.

County Finance Director Karen Hennessy explained that the county currently has $36.5 million in outstanding “road bonds” that will be paid off by 2030, as well as additional debt related to various capital projects, including the courthouse, jail, and health department facilities constructed in 2016. That $175 million bond issue will be paid through 2047.

The committee voted unanimously to move forward with exploring the refinancing opportunities, which will next be considered by the executive committee before potentially requiring full county board approval.

Financial advisors recommended acting with some urgency, noting that market conditions could change and that the current relationship between taxable and tax-exempt bond rates creates a favorable environment for the tender strategy.