Indiana to give Goldman Sachs $71m in Colts bond refinancing, that sure sounds bad, don’t it?

You know, if can’t count on the business press to give us full information about obscure financial instruments, who can we count on? BloombergBusiness reports that:

The Indiana Finance Authority, which borrowed for the home stadium of the Indianapolis Colts National Football League team, is paying about $71 million to Goldman Sachs Group Inc. to end an interest-rate swap as part of a bond sale to refinance debt.

That sounds bad — and it is bad, because it means Indiana made a lousy bet when it agreed to an interest-rate swap in financing the Colts stadium in the first place. But is this really an extra $71 million coming out of the pockets of Indiana taxpayers? The new fixed-rate bonds are at an awfully low rate, so you’d need to weigh that $71 million lump-sum cost against the savings from not having to pay higher interest rates in the future, and then compare it to the projected bond costs when the deal was first agreed to, and … no matter how far I scroll down in this Bloomberg article, it’s not going to tell me any of this, is it? Sigh. Suffice to say that this could be a good thing, or a bad thing, or making the best of a bad thing that was done years back — the only sure thing is that Goldman Sachs is getting paid, which is always the only sure thing.

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One comment on “Indiana to give Goldman Sachs $71m in Colts bond refinancing, that sure sounds bad, don’t it?

  1. Swaps are always a bad deal for a city. Doesn’t matter if you’re financing a stadium or a sewer system. A bad bet on swaps is what caused Jefferson County, Alabama to file bankruptcy. When you have a fixed asset with a reasonably predictable useful life you should use fixed rate debt to finance it. These are simple projects that require simple financing. No need to pay a lot of extra fees to Wall Street to get the deals done.

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