PRELIMINARY REMARKETING MEMORANDUM Dated: December 1, 2016
This Preliminary Remarketing Memorandum and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Remarketing Memorandum constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
NOT A NEW ISSUE – Book-Entry-Only
See "RATINGS" herein
In the Original Opinion (hereinafter defined), Co-Bond Counsel (hereinafter defined) rendered an opinion, assuming continuing compliance by the City (hereinafter defined) after the date of initial delivery of the Bonds (hereinafter defined) with certain covenants contained in the Ordinance (hereinafter defined) and subject to the matters set forth under “TAX MATTERS” herein, that interest on the Bonds for federal income tax purposes under existing statutes, regulations, published rulings, and court decisions (1) would be excludable from the gross income of the owners thereof pursuant to section 103 of the Internal Revenue Code of 1986, as amended to the date of initial delivery of the Bonds, and (2) would not be included in computing the alternative minimum taxable income of individuals or, except as described herein, corporations. Co-Bond Counsel will (in accordance with the Ordinance), render an opinion to the Paying Agent / Registrar (defined below) that the remarketing of the Bonds that is the subject of this Remarketing Memorandum will not adversely affect the excludability of interest on the Bonds for federal income tax purposes. The Remarketing Agent (defined below) will be allowed to rely on such opinion. See “TAX MATTERS” herein. Additionally, see THE BONDS – Interest During the Current Term Mode Interest Period” identifying circumstances when an opinion of nationally recognized bond counsel is required as a condition for an interest rate mode conversion. Co-Bond Counsel expresses no opinion as to the effect on the excludability from gross income for federal income tax purposes of any action requiring such an opinion.
$123,670,000* CITY OF SAN ANTONIO, TEXAS ELECTRIC AND GAS SYSTEMS VARIABLE RATE JUNIOR LIEN REVENUE REFUNDING BONDS, SERIES 2015A CONVERSION TO TERM RATE PERIOD OF 3* YEARS AT A PER ANNUM TERM RATE OF ___% (PRICED TO YIELD ___% TO MANDATORY TENDER DATE) Originally Dated: January 1, 2015 (Interest accrues from the hereinafter defined Date of Delivery)
Mandatory Tender Date: December 1, 2019 (or first Business Day thereafter)* Maturity Date: February 1, 2033
The Bonds. The City of San Antonio, Texas (the "City"), on January 7, 2015, issued its Electric and Gas Systems Variable Rate Junior Lien Revenue Refunding Bonds, Series 2015A (the "Series A Bonds" or "Bonds"), pursuant to an ordinance, adopted by the City Council of the City on October 30, 2014 ("Ordinance"), for the purposes of refinancing existing variable rate debt of the City and paying the costs of issuance of the Bonds. The Bonds are currently outstanding in the aggregate principal amount of $125,000,000. On December 14, 2016, $125,000,000 in Bonds will be tendered for purchase, and $123,670,000* in Bonds will be remarketed in a Term Mode (defined herein) to provide proceeds to pay the purchase price of the aforementioned mandatorily tendered Bonds (see "THE BONDS – Bond Provisions – Authority for the Bonds"). The Bonds are issued in fully-registered form only, without coupons, in denominations of $5,000 (or any integral multiple thereof) while in a Term Mode (see "THE BONDS – General" herein). No physical delivery of the Bonds will be made to the owners thereof. Principal of, premium, if any, and interest on the Bonds is payable by U.S. Bank National Association, Dallas, Texas, as paying agent / registrar, to Cede & Co., which makes distribution of the amounts so paid to the beneficial owners of the Bonds (see "THE BONDS – Bond Provisions – Book-Entry-Only System" herein). Interest. The Bonds are multi-modal variable rate bonds, that were initially issued in a SIFMA Index Mode effective January 7, 2015, and expiring on December 13, 2016 by election of the City. The Bonds are being remarketed in a Term Mode having a duration of 3* years (accruing interest through November 30, 2019*; such interest period applicable to the Bonds, as remarketed, the "Current Term Mode Interest Period") and, upon the conclusion thereof, will again be remarketed into a successive Interest Mode of a to-be-determined duration. During the Current Term Mode Interest Period, the Bonds will bear interest at a Term Rate equal to ____%. See the table appearing on page ii of this Remarketing Memorandum for a description of the Bonds’ Term Rate during the Current Term Mode Interest Period, as well as the Current Term Mode Interest Period’s effective date, ending date, mandatory tender date, Stepped Rate (defined herein), and CUSIP Number applicable to the Bonds, as remarketed. As the Bonds will be remarketed into a Term Mode, interest on the Bonds during the Current Term Mode Interest Period will be calculated on the basis of a 360-day year of twelve 30-day months and will be payable on each February 1 and August 1, commencing February 1, 2017, along with an irregular final interest payment on the Bonds on December 1, 2019* (being the day immediately following the last day of the Current Term Mode Interest Period). Tenders; Redemption. At the conclusion of the Current Term Mode Interest Period, the Bonds are, on December 1, 2019*, subject to mandatory tender, without right of retention by the Holders thereof (subject to the description below under "No Liquidity Support"), but such mandatory tender and purchase shall actually occur on December 2, 2019* (which is the First Business Day on or after the scheduled tender date). During the Current Term Mode Interest Period, the Bonds are not subject to optional or mandatory tender. The Bonds are not subject to redemption during the Current Term Mode Interest Period, but are subject to redemption (at the option of the City) on the interest payment date that immediately succeeds the expiration of the Current Term Mode Interest Period. See "THE BONDS – Conversion of Interest Modes (Including Current Conversion); Mandatory Tender; Purchase of Tendered Bonds" and "THE BONDS - Redemption of Bonds". No Liquidity Support. During the Current Term Mode Interest Period, the Bonds are not subject to the benefit of a liquidity facility provided by a third party. Accordingly, a failure by the Remarketing Agent (defined herein) to remarket the Bonds subject to mandatory tender at the end of the Current Term Mode Interest Period will result in the rescission of the notice of mandatory tender with respect thereto and the City not having any obligation to purchase such mandatorily-tendered Bonds at that time. The occurrence of the foregoing will not result in an event of default under the Ordinance or the Bonds. Until such time as the City redeems or remarkets such Bonds that have not been successfully remarketed as described above, those Bonds shall bear interest at the "Stepped Rate", which is identified on page ii of this Remarketing Memorandum, calculated on the basis of a 365 or 366-day year and the number of days actually elapsed. See "THE BONDS - Conversion of Interest Modes (Including Current Conversion); Mandatory Tender; Purchase of Tendered Bonds – Mandatory Tender" herein. Tender; Remarketing. All tenders of Bonds must be made to U.S. Bank National Association, Dallas, Texas, as tender agent for the Bonds (the "Tender Agent"). In the Ordinance, the City has reserved the right to appoint a substitute remarketing agent for the Bonds (which is not required to be the Remarketing Agent identified below) prior to the commencement of the requisite remarketing period applicable to the Bonds and to occur before the expiration of the Current Term Mode Interest Period. Bonds tendered for purchase at the conclusion of the Current Term Mode Interest Period will be bought from the proceeds derived from the remarketing of such Bonds, if any; provided, however, that should the date for tender of the Bonds occur on an Interest Payment Date (defined herein), the accrued interest portion of the Purchase Price (defined herein) is to be paid by the City. Security. The Bonds are special obligations of the City payable solely from and equally and ratably secured, together with the currently outstanding Junior Lien Obligations and any Additional Junior Lien Obligations hereafter issued by the City, by a junior lien on and pledge of the Net Revenues of the City's Electric and Gas Systems (as further described herein, the "Systems"), subject and subordinate to liens and pledges securing the outstanding Senior Lien Obligations and any Additional Senior Lien Obligations hereafter issued, and superior to the pledge and lien securing the currently outstanding Commercial Paper Obligations and Inferior Lien Obligations, all as fully set forth in the Ordinance. The City has reserved the right to grant equal and ratable liens on and pledges of Net Revenues to secure payment of Additional Junior Lien Obligations hereafter issued in accordance with the Ordinance (see "THE BONDS – Bond Provisions - Authority and Security for the Bonds"). Conversion. The Ordinance provides that the Bonds are, at the conclusion of the then-effective interest rate mode (other than the Fixed Mode, but including the Current Term Mode Interest Period), subject to conversion to another interest rate mode. If the Bonds are converted, in whole or in part, to an interest rate mode other than another Term Mode, a SIFMA Index Mode (defined herein), or a Fixed Mode (defined herein), the City anticipates entering into an agreement providing liquidity support for those Bonds at such time. No such agreement, however, has been entered into at this time, nor is one expected to be entered into in the future. The Bonds were originally delivered to the initial purchasers together with the approving opinion of the Attorney General of the State of Texas and the approval of certain legal matters by Norton Rose Fulbright US LLP (formerly Fulbright & Jaworski L.L.P.), and Escamilla & Poneck, LLP, of San Antonio, Texas, as Co-Bond Counsel. The remarketing of the Bonds will, through the services of DTC, be available for delivery on December 14, 2016 (the "Date of Delivery"). In connection with the remarketing of the Bonds, certain legal matters will be passed upon for the Remarketing Agent by its counsel, McCall, Parkhurst & Horton L.L.P., San Antonio, Texas.
_________________________________________________ *Preliminary, subject to change.
CURRENT TERM MODE INTEREST PERIOD INFORMATION
CITY OF SAN ANTONIO, TEXAS ELECTRIC AND GAS SYSTEMS $123,670,000* Variable Rate Junior Lien Revenue Refunding Bonds, Series 2015A Current Term Mode Interest Period commences on December 14, 2016 Term Mode Expiration*
Mandatory Tender Date(1)*
Term Mode Interest Rate (%)
Stepped Rate (%)*
Nov. 30, 2019
Dec. 1, 2019
The Bonds have a stated maturity date of February 1, 2033. The Bonds are subject to mandatory sinking fund redemption in the amounts and at the times provided in the Ordinance and as described herein under the subcaption "THE BONDS – Redemption of Bonds", but none of which occur during the Current Term Mode Interest Period. In addition, all or part of the Bonds of a particular series may be subject to redemption prior to stated maturity, and prior to the expiration of a then-current and applicable interest rate mode, if such redemption provisions are preserved at the time of conversion of such Bonds to the then-applicable interest rate mode. During the Current Term Mode Interest Period, the Bonds are not subject to optional redemption prior to the expiration of such Current Term Mode Interest Period. The Bonds are, however, subject to optional redemption on the Interest Payment Date (defined herein) immediately following the expiration of the Current Term Mode Interest Period or on any date during such time the Bonds are bearing interest at the Stepped Rate. See "THE BONDS – Redemption of Bonds". (1) Mandatory tender to occur on indicated date or on the next occurring Business Day thereafter (which is December 2, 2019). (2) The yield shown for the Bonds is calculated to December 1, 2019*. (3) CUSIP numbers have been assigned to the Bonds by CUSIP Global Services, managed by S&P Capital IQ on behalf of The American Bankers Association, and are included solely for the convenience of the owners and potential owners of the Bonds. No assurance can be given that the CUSIP number for the Bonds will remain the same after the date of delivery of such series of Bonds. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. None of the City, the Board, the Co-Financial Advisors, nor the Remarketing Agent shall be responsible for the selection, changes to, errors, or correctness of the CUSIP numbers set forth herein. _________________________________________________
*Preliminary, subject to change.
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