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MR. BLAND STATED THAT THE RULE OF THUMB TO WARRANT DE- <br />FEASEMENT WOULD BE A REDUCTION IN INTEREST RATES OF 1%, BUT THAT A <br />2% REDUCTION WOULD BE NECESSARY TO REALIZE SIGNIFICANT SAVINGS. <br />PSR. BLAND THEN PRESENTED A CHART DEMONSTRATING THE TWO ALTERNATIVES - <br />ISSUANCE OF $4,080,000 NOTES AGAINST ISSUANCE OF $4,350,000 INSURED <br />BONDS. HE NOTED THAT WITH BONDS IF THE MARKET IMPROVES SUBSTANTIALLY, <br />THEY CAN BE ADVANCE REFUNDED AND POINTED OUT THAT IF YOU LOCK IN ON <br />THE BONDS, YOU THEN KNOW WHAT THE BONDS WILL BE AND YOU HAVE THE <br />OPPORTUNITY TO GO LOWER. IF YOU GO FOR THE NOTES, YOU HAVE TO <br />FACE UP TO PLACING A PERMANENT BOND WITHIN A TWO YEAR PERIOD. HE <br />NOTED THAT HE DISCUSSED THESE ALTERNATIVES WITH FINANCE OFFICER <br />BARTON AND COORDINATOR THOMAS YESTERDAY AND THEY HAVE CERTAIN REAC- <br />TIONS WHICH THE BOARD MIGHT WISH TO HEAR. <br />FINANCE OFFICER BARTON EXPLAINED THAT IF THE BONDS WERE <br />ISSUED AND HAVE A "CALL" FEATURE, THEY CAN BE ° CALLED " OR "DEFEASED" <br />IN TEN YEARS, I.E. YOU CANNOT PAY THEM OFF WITHIN THE TEN YEARS, <br />AND YOU PAY A 3% PREMIUM TO CALL THEM WITHIN THE TEN YEARS. <br />MR. HOUGH FELT WHAT MR. BARTON IS GETTING AT IS THERE IS <br />NO WAY YOU CAN SAVE ANY MONEY ON REFUNDING THE BONDS UNTIL TEN YEARS, <br />AND THEN YOU WILL HAVE A COST TO RECALL THEM, PROBABLY A 1-2% ONE <br />TIME COST. IF YOU SELL THE BOND, YOU WILL PAY 9.82% FOR TEN YEARS <br />AND AT THE END OF TEN YEARS, IT WILL COST ABOUT TWO POINTS TO HAVE <br />A NEW ISSUE OR 3 POINTS IF YOU RECALL THEM. ON THE OTHER HAND, <br />WITH THE NOTES, YOU ARE NOT GOING TO SAVE ANY MONEY FOR TWO YEARS <br />BECAUSE THEY ARE NON -CALLABLE, BUT IF YOU DEFEASED THEM, GENERALLY <br />YOU COULD BREAK EVEN. <br />COORDINATOR THOMAS FELT IT STILL GETS BACK TO WHETHER, <br />IN THE BOARD'S OPINION, THE INTEREST RATES WILL OR WILL NOT COME <br />DOWN, AND HE FELT THAT THEIR OPINION WAS AT LEAST AS GOOD OR MAYBE <br />BETTER THAN THE EXPERTS. <br />CHAIRMAN SIEBERT ASKED HOW PSR. THOMAS AND MR. BARTON FELT <br />ABOUT THE ALTERNATIVES PRESENTED, AND MR. THOMAS STATED THAT HE WAS <br />INCLINED TO GO WITH THE NOTES, MAINLY BECAUSE HE FELT THAT THE <br />5 <br />BOOK : 42-M E'4 <br />MAR 121990 <br />