2004 Regular Session
To: Ways and Means
By: Representative Howell, Chism, Davis, Guice, Morris, Smith (39th), Watson
AN ACT TO AMEND SECTIONS 52 THROUGH 63, CHAPTER 522, LAWS OF 2003, TO INCREASE THE AMOUNT OF VARIABLE RATE DEBT INSTRUMENTS THAT THE STATE MAY ISSUE; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Sections 52 through 63, Chapter 522, Laws of 2003, are amended as follows:
Section 52. As used in Sections 52 through 63 of this act, the following words shall have the meanings ascribed herein unless the context clearly requires otherwise:
(a) "Variable rate bonds" shall mean state-supported debt which bears interest at a rate or rates which vary from time to time and shall include variable rate refunding bonds.
(b) "Interest rate exchange or similar agreement" shall mean a written contract entered into by the state with a counterparty in connection with state-supported debt to provide for an exchange of payments based upon fixed and/or variable rates, shall include interest rates, caps, collars, floors and similar agreements and options on each of the foregoing, and shall be for exchanges in currency of the United States of America only with such terms determined by the commission to be in the financial best interest of the state.
(c) "State-supported debt" shall mean any bonds or notes, including bonds or notes issued to fund reserve funds and costs of issuance and refunding bonds or refunding notes, currently outstanding or authorized to be issued by the state for which the state is or will be constitutionally obligated to pay debt service or is or will be contractually obligated to pay debt service subject to an appropriation; however, this definition shall not apply to debt issued by the Mississippi Development Bank or similar state agencies or authorities.
(d) "Counterparty" shall mean the provider of or other party to an interest rate exchange or similar agreement.
(e) "State" shall mean the State of Mississippi.
(f) "Commission" shall mean the State Bond Commission of the state.
(g) "Variable rate debt instruments" shall mean variable rate bonds, variable rate refunding bonds and interest rate exchange or similar agreements which result in the state effectively paying interest at a rate or rates which vary from time to time.
(h) "Excluded agreements" shall mean the total notional amount of interest rate exchange or similar agreements entered into for the purpose of reducing, reversing or unwinding another interest rate exchange or similar agreement or eliminating a situation of risk or exposure under an existing interest rate exchange or similar agreement, including, but not limited to, a counterparty downgrade, default, or other actual or potential economic loss.
Section 53. The purpose of Sections 52 through 63 of this act is to provide full and complete authority for the state, acting by and through the commission, to issue or enter into variable rate debt instruments. No procedure or proceedings, publications, notices, consents, limitations, approvals, orders, acts or things, other than those required by Sections 52 through 63 of this act, shall be required to issue or enter into any variable rate debt instruments or to do any act or perform anything under Sections 52 through 63 of this act except as otherwise may be prescribed in Sections 52 through 63 of this act. The powers conferred by Sections 52 through 63 of this act shall be in addition and supplemental to, and not in substitution for, and the limitations imposed by Sections 52 through 63 of this act shall not affect the powers conferred by any other law. Sections 52 through 63 of this act are remedial in nature and shall be liberally construed.
Section 54. (1) Notwithstanding any other provision of law to the contrary, any otherwise authorized state-supported debt may be issued as variable rate bonds. Except as otherwise provided in Sections 52 through 63 of this act or when in conflict with the provisions in Sections 52 through 63 of this act, such variable rate bonds shall be subject to the terms and provisions of the legislation authorizing the issuance of such state-supported debt.
(2) Variable rate bonds issued by the state pursuant to the provisions of subsections (1) of this section or Section 55 of this act, shall be issued pursuant to an authorizing resolution of the commission. Such variable rate bonds may be issued in one or more series, may bear such date or dates, may bear interest at such rate or rates, varying from time to time, not to exceed that allowed by law for the class of bonds being issued, may be in such denominations, may be subject to such terms of redemption (with or without premium) may be sold at private sale with a competitive element (which sale shall be on such terms and in such manner as the commission shall determine) and may contain such other terms and covenants (including, without limitation, covenants for the security and better marketability of such variable rate bonds), as may be provided by resolution of the commission. Pursuant to the provisions of Sections 52 through 63 of this act, the commission may enter into such agreements as may be necessary in connection with the issuance of such variable rate bonds.
Section 55. (1) This section and other applicable provisions of Sections 52 through 63 of this act, without reference to any other statute, shall be deemed full and complete authority for the issuance of variable rate refunding bonds by the state, and shall be construed as an additional and alternative method therefor.
(2) The state, acting by and through the commission, may refund outstanding bonds through the issuance of variable rate refunding bonds. Any such refunding may be effected whether or not the bonds to be refunded shall have then matured or shall thereafter mature.
(3) Variable rate refunding bonds issued pursuant to Sections 52 through 63 of this act may be secured by a pledge of: (a) the same source of security as the bonds to be refunded, or (b) such other security as the state may lawfully pledge, or both; all as may be provided by resolution of the commission.
(4) At the time of the issuance of such variable rate refunding bonds, the commission shall find by resolution that at the time of such refunding, such refunding is expected to result in an overall net present value savings to maturity of not less than two percent (2%) of the bonds being refunded.
Section 56. In connection with state-supported debt, the commission shall have the power to:
(a) Enter into interest rate exchange or similar agreements with any person under such terms and conditions as the commission may determine, including, but not limited to, provisions as to default or early termination;
(b) Procure insurance, letters of credit or other credit enhancement with respect to agreements described in paragraph (a) of this section;
(c) Provide security for the payment or performance of its obligations with respect to agreements described in paragraph (a) of this section from such sources and with the same effect as is authorized by applicable law with respect to security for its bonds, notes or other obligations; however, any payment or performance of obligations with respect to agreements described in paragraph (a) of this section in connection with debt obligations which carry the full faith and credit of the state shall be subject to appropriation;
(d) Modify, amend, or replace, such agreements described in paragraph (a) of this section; and
(e) Because of the complexity of agreements described in paragraph (a) of this section, the commission may solicit the provision of such agreements on a competitive or negotiated basis with a competitive element included.
Section 57. Any interest rate exchange or similar agreements entered into pursuant to Section 56 of this act shall be subject to the following limitations:
(a) The counterparty thereto shall have credit ratings from at least one nationally recognized statistical rating agency that is within the two (2) highest investment grade categories and ratings which are obtained from any other nationally recognized statistical rating agencies shall also be within the three (3) highest investment grade categories, or the payment obligations of the counterparty shall be unconditionally guaranteed by an entity with such credit ratings;
(b) The written contract shall require that should the rating: (i) of the counterparty, if its payment obligations are not unconditionally guaranteed by another entity, or (ii) of the entity unconditionally guaranteeing its payment obligations, if so secured, fall below the rating required by paragraph (a) of this section, that the obligations of such counterparty shall be fully and continuously collateralized by direct obligations of, or obligations the principal and interest on which are guaranteed by the United States of America with a net market value of at least one hundred two percent (102%) of the net market value of the contract of the authorized insurer and such collateral shall be deposited as agreed to by the commission;
(c) The counterparty has a net worth of at least One Hundred Million Dollars ($100,000,000.00), or the counterparty's obligations under the interest rate exchange or similar agreement are guaranteed by a person or entity having a net worth of at least One Hundred Million Dollars ($100,000,000.00);
(d) The total notional amount of all interest rate exchange or similar agreements for the state to be in effect shall not exceed an amount equal to fifty percent (50%) of the total amount of state-supported debt outstanding as of the initial date of entering into each new agreement; however, such total notional amount shall not include any excluded agreements;
(e) No interest rate exchange or similar agreement shall have a maturity exceeding the maturity of the related state-supported debt;
(f) Each interest rate exchange or similar agreement shall be subject to a finding by the commission that its terms and conditions reflect a fair market value of such agreement as of the date of its execution, regardless of whether such agreement was solicited on a competitive or negotiated basis with a competitive element; and
(g) Each interest rate exchange or similar agreement, including the modification or termination thereof, shall be subject to the approval of the commission or its designee.
Section 58. (1) As of the initial date of each issuance of variable rate debt instruments, the total of the principal and notional amounts of such variable rate debt instruments outstanding and in effect shall not exceed an amount equal to fifty percent (50%) of the total principal amount of state-supported debt outstanding.
(2) The limitation contained in subsection (2) of this section shall not include any excluded agreements.
Section 59. Nothing in Sections 52 through 63 of this act shall be construed as to apply to or limit any debt obligation or related instrument of the state or any other issuers except those obligations or instruments which are or relate to state-supported debt.
Section 60. Sections 52 through 63 of this act shall be deemed to be full and complete authority for the exercise of the powers herein granted, but Sections 52 through 63 of this act shall not be deemed to repeal or to be in derogation of any existing law of this state.
Section 61. All variable rate bonds issued under Sections 52 through 63 of this act shall be fully negotiable in accordance with their terms and shall be "securities" within the meaning of Article 8 of the Uniform Commercial Code, subject to the provisions of such bonds pertaining to registration. It shall not be necessary to file financing statements or continuation statements to protect the lien and pledge granted by a governmental unit to the holders of any variable rate bonds issued under Sections 52 through 63 of this act.
Section 62. All variable rate bonds issued under the provisions of Sections 52 through 63 of this act and income therefrom shall be exempt from all taxation in the State of Mississippi.
Section 63. If any one or more sections, clauses, sentences or parts of Sections 52 through 63 of this act shall for any reason be questioned in any court and shall be adjudged unconstitutional or invalid, such judgment shall not affect, impair or invalidate the remaining provisions of Sections 52 through 63 of this act, but shall be confined in its operations to the specific provisions so held invalid, and inapplicability or invalidity of any such section, clause, provision or part shall not be taken to affect or prejudice in any way the remaining part or parts of Sections 52 through 63 of this act.
SECTION 2. This act shall take effect and be in force from and after its passage.