Clifton Higher Education Finance Corporation
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PRELIMINARY OFFICIAL STATEMENT DATED AUGUST 25, 2016 NEW ISSUE — BOOK-ENTRY ONLY RATINGS: SEE “RATINGS” HEREIN The delivery of the Bonds (as defined below) is subject to the opinion of Bond Counsel to the effect that, assuming compliance with certain covenants and based on certain representations, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law and is not includable in the alternative minimum taxable income of individuals. See “TAX MATTERS” herein for a discussion of the opinion of Bond Counsel, including the alternative minimum tax consequences for corporations. CLIFTON HIGHER EDUCATION FINANCE CORPORATION $18,170,000* EDUCATION REVENUE BONDS (IDEA PUBLIC SCHOOLS) SERIES 2016B Dated: October 1, 2016 – Interest accrues from date of delivery Due: as shown on inside cover The Clifton Higher Education Finance Corporation (the “Issuer”), a non-profit corporation created and existing under Chapter 53 and 53A of the Texas Education Code, as amended from time to time (the “Act”), is issuing its $18,170,000* Education Revenue Bonds (IDEA Public Schools) Series 2016B (the “Bonds”). The Bonds will be dated October 1, 2016, will be in authorized denominations of $5,000 and integral multiples thereof, and will mature on August 15 of the years as shown on the inside cover page. The Bonds will accrue interest from their date of delivery payable semi-annually on February 15 and August 15 of each year, commencing February 15, 2017, until maturity or earlier redemption. The Bonds are being issued pursuant to a Trust Indenture and Security Agreement dated as of October 1, 2016 (the “Bond Indenture”) between the Issuer and Regions Bank, as trustee (the “Bond Trustee”). The proceeds of the Bonds will be loaned by the Issuer to IDEA Public Schools, a Texas non-profit corporation (“IDEA”) pursuant to the terms of a Loan Agreement dated as of October 1, 2016 (the “Loan Agreement”). The Bonds are special limited obligations of the Issuer payable solely from (i) payments to be made by IDEA pursuant to the Loan Agreement, (ii) a promissory note (the “Series 2016B Note”) in an amount equal to the principal amount of the Bonds delivered to the Issuer pursuant to the Loan Agreement and pursuant to the Master Trust Indenture and Security Agreement, dated as of May 1, 2007, as amended (the “Master Indenture”), between IDEA and Regions Bank, as successor master trustee (the “Master Trustee”), (iii) the money and investments held for the credit of the funds and accounts established by or under the Bond Indenture (except the Rebate Fund), and (iv) in certain circumstances, out of amounts secured by the exercise of remedies provided in the Loan Agreement, the Bond Indenture and the Master Indenture. The Series 2016B Note constitutes additional indebtedness under the Master Indenture, and is issued on parity with certain other promissory notes issued by IDEA that are expected to be outstanding (excluding the Regions Note and the portion of the promissory notes related to the Refunded Bonds (as such terms are defined herein), which are expected to be paid or defeased with proceeds of the Bonds) in the aggregate principal amount of $438,535,000* (the “Prior Master Notes” and, together with the Series 2016B Note and any additional promissory notes entitled to the benefit of the Master Indenture, the Master“ Notes”). IDEA executed a Deed of Trust and Security Agreement dated as of June 6, 2007, as supplemented (the “Deed of Trust”), which Deed of Trust encumbers certain property of IDEA in favor of the Master Trustee for the benefit of the holders certain of the Master Notes. See SECURITY“ FOR THE BONDS.” The Bonds are subject to redemption prior to maturity, as described herein. See “THE BONDS — Redemption Provisions.” IDEA will issue the Bonds and the Series 2016A Bonds (defined herein) for the purpose of financing and/or refinancing all or a portion of (i) the development of the Rio Grande City Campus, McAllen Campus No. 2, San Antonio Campus No. 8, San Antonio Campus No. 9 and San Antonio Campus No. 10, and (ii) additional improvements at the Riverview Campus, Eastside Campus and Rundberg Campus (collectively clauses (i) and (ii) are referred to herein as the “Project”), (iii) refunding a portion of the City of Pharr, Texas Higher Finance Authority Education Revenue Bonds (IDEA Public Schools) Series 2009A and the San Juan Higher Education Finance Authority Education Revenue Bonds (IDEA Public Schools) Series 2010A, and (iv) paying costs of issuance. See “PLAN OF FINANCE.” IDEA currently operates fifty-one charter schools at twenty-six campuses in the Rio Grande Valley, Austin and San Antonio, and plans to begin operations at 10 schools at 5 additional campuses in August of 2017 (collectively, the “Charter Schools”), all pursuant to one open-enrollment charter contract with the Texas Education Agency. See “PLAN OF FINANCE” and “APPENDIX B — IDEA AND THE CHARTER SCHOOLS.” IDEA may not charge tuition and has no taxing authority. NEITHER THE STATE OF TEXAS NOR A STATE AGENCY OR POLITICAL SUBDIVISION OF THE STATE, INCLUDING THE CITY OF CLIFTON, IS OBLIGATED TO PAY THE PRINCIPAL OF OR INTEREST ON THE BONDS AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OR ANY STATE AGENCY OR POLITICAL SUBDIVISION OF THE STATE, INCLUDING THE CITY OF CLIFTON, IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS. THE ISSUER HAS NO TAXING POWER. The Bonds will be issued as registered bonds in book-entry only form in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York, which will act as securities depository for the Bonds. Purchases of beneficial interests in the Bonds will be made in book-entry only form and purchasers will not receive physical certificates representing the ownership interest in the Bonds purchased by them. See “APPENDIX H — BOOK-ENTRY ONLY SYSTEM.” This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read this entire Official Statement to obtain information essential to the making of an informed investment decision, and should pay particular attention to the material under the caption “RISK FACTORS.” The Bonds are offered when, as and if issued by the Issuer and received and accepted by the Underwriter and subject to the approval of certain matters by the Attorney General of the State and an opinion as to legality by Andrews Kurth LLP, Houston, Texas, Bond Counsel. Certain legal matters will be passed upon by Naman, Howell, Smith & Lee, PLLC, as counsel to the Issuer; by Andrews Kurth LLP, Houston, Texas, as counsel to IDEA; by Haynes and Boone, LLP, as counsel to the Trustee and Master Trustee; and by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, as counsel to the Underwriter. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about October __, 2016. BAIRD This Preliminary Official Statement and the information contained herein are subject to completion or amendment without notice. These securities may not be sold, nor may offers to buy them be accepted, prior to the time Official Statement to offers not be sold, nor may These securities may This Preliminary contained herein are subject to completion or amendment without notice. Official Statement and the information of, these securitiesany jurisdiction in in which such offer, any sale nor shall there be buy, to Under no circumstances shall this Preliminary to sell or the solicitation of an offer Official Statement constitute an offer form. in final is delivered any such jurisdiction. priorlaws of qualification or filing under the securities to registration, be unlawful solicitation or sale would * Preliminary, subject to change. MATURITY SCHEDULE CLIFTON HIGHER EDUCATION FINANCE CORPORATION $18,170,000* EDUCATION REVENUE BONDS (IDEA PUBLIC SCHOOLS) SERIES 2016B $18,170,000* Serial Bonds August 15 Principal Amount* Interest Rate (%) Yield (%) CUSIP No.(1) 2018 $ 685,000 187145 ____ 2019 1,340,000 187145 ____ 2020 1,390,000 187145 ____ 2021 1,470,000 187145 ____ 2022 1,525,000 187145 ____ 2023 1,610,000 187145 ____ 2024 1,695,000 187145 ____ 2025 1,840,000 187145 ____ 2026 2,015,000 187145 ____ 2027 2,195,000 187145 ____ 2028 2,405,000 187145 ____ * Preliminary, subject to change. C Yield to the first call date at par. (1) CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Global Services. CUSIP numbers have been assigned by an independent company not affiliated with the Issuer, IDEA or the Underwriter and are included solely for the convenience of the holders of the Bonds. None of the Issuer, IDEA or the Underwriter are responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the execution and delivery of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of the Bonds. NOTICE TO INVESTORS OF THE BONDS Purchasers of the Bonds or any interest therein, are hereby given notice as follows: (a) The Bonds are special, limited obligations of the Issuer payable solely from revenues to be derived by the Issuer under the Loan Agreement, the Series 2016B Note, and all money and investments held for the credit of the funds and accounts established by or under the Bond Indenture (except the Rebate Fund), and in certain events out of amounts secured through the exercise of the remedies provided in the Bond Indenture, the Loan Agreement the Master Indenture and the Deed of Trust.