OPD Board Votes To Reprice Debt Now Before Interest Rates Rise

By VERNON ROBISON

Moapa Valley Progress

The Overton Power District (OPD) Board of Directors voted unanimously last week to restructure $3.7 million in debt. This action was intended to lock in a relatively low interest rate on the debt just as the market enters, what board members felt would be, an environment of rising rates in the coming months.
One of the district’s nine different loans through the National Rural Utilities Cooperative Finance Corporation is up for repricing this year, explained OPD Assistant General Manager Terry Romero at a board meeting held on Wednesday in Overton. The loan currently bears an interest rate of 3.45 percent.

It actually comes due for repricing on Sept. 1 of this year, Romero explained. But the district has the option to lock in a new rate for the next term as early as June 1.
“We are bringing this to you early because the way that interest rates are going right now, we may want to move early to lock in the rate,” Romero said.

Romero explained that the board could choose to lock in a 4 percent rate for another five year term. At the end of the five years, the district would have to reprice again at the going market interest rate at that time.
Alternatively, the board could choose another option to lock in a 4.3 percent rate for a period of 11 years, which is the remaining term of the loan.

Romero explained that the additional interest would add an expense of about $10,640 to the loan, compared to repricing for only the five year term. But she pointed out that, taking the five year option, the district would have to reprice the loan again in five years at what would possibly be a much higher rate than the 11 year option was offering. Romero suggested that locking in the current low rates might save the district money in the long run.

Board members generally expressed a willingness to take a conservative approach to the repricing.
“I am more comfortable with taking that 4.3 percent on 11 years because who knows what is going to happen in five years,” said Moapa board member Chad Leavitt. “The Fed is supposedly hiking the rates any day now and all the trends are going in that direction. So I am much more comfortable with a known than a hope.”

Bunkerville board member Bob Bunker made the motion to instruct staff to lock in the rate on June 1 at the 11 year term as long as that rate was at 4.35 percent or lower. The board approved the motion with a unanimous vote.