Nova Scotia Municipal Finance Corporation Overview, Programs, Debenture Process, Fact/Fiction. Village Presentation at Bible Hill September 24, 2010. Outline of Presentation. MFC and its Role Role of the MFC in Financing How the MFC fulfils its’ role Programs Offered by the MFC
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Village Presentation at Bible Hill
September 24, 2010.
Fiction – the MFC borrows on the credit of the Province plus a number of basis points (100 basis point = 1.00%). This means that the cost of issuing debentures through the MFC is the lowest cost of funds available to a municipality.
Fiction – bank prime rates are floating short term rates, because they are a floating rate they are volatile. The MFC is locked in financing over the life of the project there is certainty with the cost of funds and the associated principal and interest payments.
Better financing method for setting long-term residential and commercial tax rates.
=>MFC debenture issues are normally priced 3-4 weeks prior to the Settlement Date.
=> Since November 2000, prime has averaged 4.77% (7.50% high; 2.25% low) and changing every 83 days (high of 412 days; low of 13 days)
Fiction – the MFC can structure long term capital financing over the term that you want 3, 5, 8 or 15 years. It can provide blended payments, serial payments, gross proceeds or net proceeds.
The MFC also has a short term borrowing program available to municipalities.
It is up to the municipality to do their cash flow projections that best suits their financing needs (not MFC’s responsibility). The MFC mirrors the information provided by the municipality when it borrows.
Fact - The MFC issues debentures in its own name in order to lend to municipalities. An early repayment by a client would put the MFC “offside” and would result in increased costs for municipalities. The MFC can arrange debentures with different terms and amortization periods. As an example, a 10 year amortization period with a 3 year term would give a municipality the option to completely pay the loan off at 3 years or refinance for the remaining 7 years.