Thursday, January 26, 2006

"LUS optimistic on bonds cost"

Kevin Blanchard over at the Advocate writes a follow-up on Huval's fiber project remarks at Tuesday's council. (Remarks reviewed here yesterday.) As we've come to expect, Kevin adds useful detail to the story. The story highlights the central issue raised by Williams: whether the recent court ruling, and the city's decision not to appeal effect the business plan. The simple answer: No.

The reporter apparently went back to Huval for detail as to why this is so; asking about the interest rates that Huval briefly alluded to in the council meeting. Here's the boiled down result:
In 2004, LUS issued a feasibility study that included a general overview of the communications business plan.

In the feasibility study, LUS factored in an interest rate of 5.5 percent.

Huval said LUS is likely looking at interest rates nearer 4.5 percent now -- higher than previously thought, but still cheaper than the "conservative" rate assumed in the original business plan.
That's the good news...the fear had been that a ruling which (nonsensically, I still believe) forced LUS to go through a legalistic jumping in and out of default every time it applies provisions of the (un)Fair Competition Act would hurt the price of the bonds. Apparently that's not as big an issue as it might have been:
The court’s ruling will require LUS to rewrite a portion of its bond ordinance that allowed revenue from the overall utilities system to be used to make debt payments on behalf of the new communications system without the new communications business going into default.

Without that mechanism, Huval said, the project carries a greater risk to the bond holders and could have driven up the interest rate the market would charge the start-up company.

But in talks with brokers about the new court-mandated approach, "that has not been a problem," Huval said.
Reading between the lines, it appears to me is that the city and LUS have been out there trying negotiate a rewrite that navigates between the the judge's ruling and the language most comfortable to the bonding community--and that after running some new wording past the bonding guys our team is confident that new language can be inserted that will minimize the damage BellSouth hoped to inflict.

The wheel continues to turn. I'm now eager to see those bonds sold.

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I'll be blunt here: I hope BellSouth will leave us alone this time. They need to. They are risking their future in this community. As it stands now they'll have to come to a franchising agreement with this community to sell video in Lafayette. The feds may not step in and save them from local franchising. And they are developing a constituency here that will stand adamantly opposed to their making the same move at the state level. BellSouth's actions are fostering an organized community across storm-ravaged South Louisiana that not only wants to repeal BellSouth's law but will also adamantly oppose the state legislature moving to state-wide franchising of video and further cutting local communities out of the control of their own future. This is one of those "Make my day" situations: There's a part of me (the state-wide citizen) that hopes that BellSouth will hand me what I need to expand that growing coalition by continuing to oppose the expressed will of the people. After all, last week's arrogance is useful. But being able to point to current malevolence is a better tool, I have discovered... Go ahead. Make my day.

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