SUBJECT
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Adopt Resolution 2025-24 to Approve the First Amendment to the Truist Loan Agreement (Action)
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DESCRIPTION
In April 2023, the PRWC Board of Directors approved the WIFIA loan agreement in the amount of $305,799,441 to provide long-term funding for eligible project costs through the anticipated five-year construction period. The WIFIA loan closed in May 2023 and has an interest rate of 4.02%.
As an alternative to drawing from the WIFIA loan for the initial three years of construction, Truist Commercial Equity, Inc. (“Truist”) an affiliate of Truist Bank submitted a proposal to the PRWC for a $154,338,308 fixed-rate tax-exempt bank loan to be used as interim financing. The Truist loan has an interest rate of 3.55% with tender dates beginning in November 2025 and every 6 months thereafter until November 2028, unless modified by Truist. The Truist loan was fully funded at closing, allowing for the loan proceeds to be invested in a fully collateralized depository account with Truist Bank in accordance with the PRWC Investment Policy. Interest on the Truist loan is capitalized and will be included in the WIFIA take-out. The net interest cost of the Truist loan, when considering investment earnings, results in debt service savings when compared to draws on the higher interest rate WIFIA loan.
Additionally, by delaying draws from the WIFIA loan using the Truist loan, the PRWC maintains the flexibility to request a one-time interest rate reset on the WIFIA loan assuming certain conditions are met. if the applicable treasury rates go down in the future prior to the WIFIA loan being drawn and as long as PRWC has spent less than 50% of eligible project costs, the PRWC may request a one-time interest rate reset to lower the interest rate on the WIFIA loan.
With the November 2025 loan tender date approaching and the PRWC spending at a slower rate than anticipated, the PRWC requested Truist to extend the tender date on the loan. This would allow for an additional year (November 2026) to continue to use the Truist loan proceeds before drawing on the WIFIA loan and thereby preserving the possibility of reducing the interest rate on the WIFIA loan. Additionally, WIFIA has changed its policies and there is no longer a requirement for the rate reduction to be at least 0.50%. The PRWC can request a one-time interest rate reduction if the equivalent average life Treasury rate is below 4.02%. Truist agreed to amend the loan to:
1) Extend the next tender date to November 13, 2026;
2) Waive the extension fee of approximately $100,000; and
3) Adjust the interest rate from 3.55% to 3.78%.
RECOMMENDATION
Adopt Resolution 2025-24 to Approve the First Amendment to the Truist Loan Agreement
FISCAL IMPACT
The Truist loan amount is in the amount of $154,338,308. The PRWC has utilized the lower interest rate Truist loan (the current amount of the Truist loan remaining is approximately $83,000,000) and has not made a draw upon the WIFIA loan. If interest rates decline by November 2026, the PRWC could experience a reduction of future WIFIA loan interest costs through a one-time interest rate reset. The flexibility for PRWC to request a one-time interest rate reset if interest rates decline is a valuable financial option and the interest rate on the Truist loan remains below the WIFIA loan. Also, the interest earnings on the unspent Truist loan proceeds help offset the interest cost of the loan.
CONTACT INFORMATION
Julie Santamaria, PFM Financial Advisors LLC