Fwd: COMPARISON OF CASH REQUIREMENTS FOR KWA CUSTOMERS
- From
- Manny Lentine
- To
- John Walsh , David Hodgkins , Matt Solak
Rep. Walsh,
As follow-up to the meeting with Treasury in your office, the below has been prepared by John O'Brien
of KWA and John Lininger of Neuma, | am told. Treasury (Wayne) had requested data from KWA.
if this is not in an acceptable format (if, for example, you need an accompanying letter from KWA),
please let Matt and | know and one of us will pursue that.
Thank you.
Manny
Begin forwarded message:
xxxEND_PAGE:treasury01_b16_2099_2148_45
2)
3)
4)
1)
TIME SENSITIVE ASSUMPTIONS USING BAN AND LIFE SETTLEMENTS FINANCING
March 1, 2014
200 million dollar BAN loan @ 1% for 13 months ( construction capital ) = 2,167,000 dollars
annual interest
Apri) 1, 2014
180 Million Dollar Life Settlement loan@ 5% for 20 year term. PREPAID INTEREST AND
UNDERWRITER’S FEES, INTEREST ONLY FOR 3 YEARS, INCLUDED IN LOAN). Loan paid in full in 20
years or less
April 1, 2015
100 million dollar additional BAN financing plus 200 million dollar rollover of initial BAN. Total
300 million dollars @ 2% for 13 months = 6.5 million dollars interest. Total interest cost for
both BAN financing totals 8,667,000.
May 1, 2016
Combined loan for capital improvements and Life Settlements, including pre-paid interest, total
605,000,000 million dollars; see financial model “A”
ASSUMPTIONS USING BOND FINANCING ONLY
March 1, 2014
600 million dollar bond financing loan @ 5% for 25 years = 27,349,383 million dollars per year
principle and interest; see amortization schedule “B”. Total repayment = 601,686,428 million
dollars
COMPARATIVE FINANCING MODELS TO KWA BETWEEN:
“A” combined annual capital and life settlement loan costs for 20 years
“B” conventional bond transaction for 25 years
xxxEND_PAGE:treasury01_b16_2099_2148_46
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xxxEND_PAGE:treasury01_b16_2099_2148_47
Exhibit B: 25 yr Amortization Schedule
Loan Amount
Interest Rate
Annual Payment
Year Beg. Balance
360,000,000
360,000,000
360,000,000
360,000,000
350,650,617
340,833,765
330,526,070
319,702,990
308,338,757
10 296,406,311
11 283,877,244
12 270,721,723
13 256,908,426
14 242,404,464
15 227,175,304
16 211,184,687
17 194,394,538
18 176,764,882
19 158,253,743
20 138,817,047
21 118,408,516
22 96,979,559
23 = 74,479,154
24 50,853,728
25 26,047,032
Cana abana
Totals
360,000,000
5.00%
25,542,885
interest
(18,000,000)
(18,000,000)
(18,000,000)
(18,000,000)
(17,532,531)
(17,041,688)
(16,526,303)
(15,985,150)
(15,416,938)
(14,820,316)
(14,193,862)
(13,536,086)
(12,845,421)
(12,120,223)
(11,358,765)
(10,559,234)
(9,719,727)
(8,838,244)
(7,912,687)
(6,940,852)
(5,920,426)
(4,848,978)
(3,723,958)
(2,542,686)
(1,302,352)
(295,686,428)
Principal
0
0
0
(9,349,383)
(9,816,852)
(10,307,695)
(10,823,080)
(11,364,234)
(11,932,445)
(12,529,068)
(13,155,521)
(13,813,297)
(14,503,962)
(15,229,160)
(15,990,618)
(16,790,149)
(17,629,656)
(18,511,139)
(19,436,696)
(20,408,531)
(21,428,957)
(22,500,405)
(23,625,425)
(24,806,697)
(26,047,032)
(360,000,000)
Total Paid
0
io}
0
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(27,349,383)
(601,686,428)
Ending Balance
360,000,000
360,000,000
360,000,000
350,650,617
340,833,765
330,526,070
319,702,990
308,338,757
296,406,311
283,877,244
270,721,723
256,908,426
242,404,464
227,175,304
211,184,687
194,394,538
176,764,882
158,253,743
138,817,047
118,408,516
96,979,559
74,479,154
50,853,728
26,047,032
0
xxxEND_PAGE:treasury01_b16_2099_2148_48
SUMMARY AND CONCLUSIONS
In the assumptions listed herein, the Blair proposal clearly provides KWA with substantial cost savings,
less years of debt, and liquidity in the first three years. During the initial three years, KWA cannot pay
P&I for conventional financing while continuing their annual payment obligation( 25 million dollars plus)
to the City of Detroit. Conventional bond sales cannot provide the same cash flow without dramatically
raising the existing user fees charged by KWA.
Blair has proposed a multi-staged arrangement using BAN financing in conjunction with Life Settlements.
The cost of BAN financing, over 26 months, is 8,667,000 dollars.
The chart below illustrates the difference and advantages to these financing options:
SUMMARY OF FINANCING COMPARISON TO KWA
CONVENTIONAL BOND SALES
1. Annual cost to KWA = $27,349,383 per year over 22 years
2. Total repayments by KWA = $601,686,428
3. Balance in account after loan repayment = $0
BLAIR PROPOSAL
Annual cost to KWA = $20,000,000 per year for 17 years
Total repayments by KWA = $321,698,272 (includes cash balance and remaining policies after
loan is repaid)
3. Balance in account after loan repayment = $26,968,395
KWA out-of-pocket cash required = $8,667,000 (years 1-3)
xxxEND_PAGE:treasury01_b16_2099_2148_49
COMPARISION OF CASH REQUIREMENTS FOR KWA CUSTOMERS
YEARS
a
| $25,000,000] | __—$2,166,667 |BAN Financing interest
| $27,250,000| $6,500,000 |BAN Financing Interest
| $29,702,500]
| 827,349,383] $20,000,000 |
| 827,349,383] $20,000,000 |
| $27,349,383] $20,000,000 |
J $27,349,383 | $20,000,000 |
$27,349,383 $20,000,000
$27,349,383 $20,000,000
$27,349,383 $20,000,000
$27,349,383 $20,000,000
BlelelelelReie
AM sSlwin|[Rplo ~ winnie
B
~
19
| 20)
| __ $27,349,383
| $27,349,383[
| 23 | __$27,349,383|
| 24 | _$27,349,383[
|___$27,349,383[
| es ee
$348, 666,667
GENERAL ASSUMPTIONS:
5% interest rate for bond sales and Blair
25 year term for bond sale
20 year term for Blair
Years 1-3 Low payments for bond sales and Blair
Full assumptions (see attached to email)
xxxEND_PAGE:treasury01_b16_2099_2148_50