PURPOSE

The purpose of this report is to request approval of a revision to the Second Supplemental Indenture of Trust related to the issuance of up to $23 million in Burbank Public Financing Authority, Revenue Bonds 2003 Series C (City Centre Redevelopment Project), previously approved by the Agency, relating to the issuance of up to $23 million in Burbank Public Financing Authority, Revenue Bonds 2003 Series C (City Centre Redevelopment Project) adding a provision indemnifying Financial Security Assurance (FSA), which provision is a standard requirement in connection with amendments that do not relate to the credit risk assumed by FSA as insurer of bonds such as the Agency Bonds, as defined hereafter.   

BACKGROUND

On August 19, 2003, the Agency and the Burbank Public Financing Authority (Authority), authorized the issuance of up to $23 million in Burbank Public Financing Authority, Revenue Bonds 2003 Series C (City Centre Redevelopment Project)(Authority Bonds), the proceeds of which will be used to purchase, in lieu of redemption, the Agency�s 1993 City Centre bonds (Agency Bonds). Also on August 19, 2003, the Agency various the forms and authorized the execution of various documents required in connection with the issuance of the Authority Bonds and the purchase in lieu of redemption of the Agency�s bonds, including a second supplemental indenture, by and between the Agency and the Trustee, amending and supplementing the Agency Indenture (the �Second Supplemental Indenture�). Subsequent to the Agency�s and the Authority�s approval the Agency requested the consent of FSA to the amendment of the Agency Indenture by the Second Supplemental Indenture of Trust, which consent is required by the terms of the Agency Indenture. FSA is the bond insurer of the Agency Bonds. FSA requires indemnification, which is standard practice for that company in connection with amendments that do not relate to the credit risk assumed by FSA as insurer of bonds such as the Agency Bonds.

The Agency has not encountered this requirement in the past from other bond insurers, however, this is standard practice by FSA.

ANALYSIS

The issuance of the Authority Bonds and the purchase in lieu of redemption of the Agency Bonds will only be completed if sufficient savings are generated. To maximize the potential savings it is critical to avoid the cost of obtaining insurance on the Authority Bonds. As FSA already insures the Agency Bonds which will secure the Authority Bonds, Standard & Poor�s has agreed to provide an �AAA� rating on the Authority Bonds without the need to purchase additional bond insurance. As an alternative to providing the requested indemnification language to FSA, additional bond insurance could be purchased for the Authority Bonds. Purchasing additional bond insurance would increase the cost of issuance by a minimum of $360,000 significantly reduce the savings of the refunding.

The previously adopted resolutions granted staff the ability to make non-substantive changes to the bond documents. As the request to provide FSA with an indemnity did not arise until after the August 19, 2003 meeting, the need for additional Agency Board approval for this revision to the Second Supplemental Indenture is necessary. Bond Counsel, Quint & Thimmig LLP, has prepared the following language to be inserted within the Second Supplemental Indenture of Trust which provides the required indemnification:

The Agency covenants and agrees to indemnify and save the Bond Insurer and its officers, directors, agents and employees, harmless against all claims, losses, costs, expenses, liability and damages, including legal fees and expenses (including allocated costs of internal counsel), which the Bond Insurer may incur arising out of or in connection with any purchase in lieu of redemption of the 1993 Series A Bonds accomplished by the Agency, including the costs and expenses of defending against any claim of liability, suit, action or proceeding.

Bond Counsel has opined that this revision to the Second Supplemental Indenture does not materially adversely affect the interests of the Owners of the Bonds, and therefore he recommends adopting the aforementioned language.   

 FISCAL IMPACT

The amendment to the Second Supplemental Indenture of Trust will avoid the purchase of additional bond issuance costs which represents a minimum of $360,000.

RECOMMENDATION

Staff recommends that the Redevelopment Agency Board approve a resolution entitled, �RESOLUTION APPROVING, AND AUTHORIZING AND DIRECTING EXECUTION OF A SECOND SUPPLEMENTAL INDENTURE OF TRUST RELATING TO THE REFINANCING OF REDEVELOPMENT ACTIVITIES WITHIN THE CITY CENTRE REDEVELOPMENT PROJECT AREA AND AUTHORIZING AND DIRECTING ACTIONS WITH RESPECT THERETO�.