ADFA Steps In To Help Big River Steel With $5 Million Bridge Funding
by June 24, 2014 5:49 pm 130 views
The Arkansas Development Finance Authority (ADFA) board of directors agreed to back $5 million in bridge-gap funding for the $1.3 billion Big River Steel Mill project in Northeast Arkansas.
At a meeting of the loan guarantee committee on Tuesday (June 24), ADFA agreed to make available the $5 million, if necessary, to assure other financial investors in the project that local funding would be secure.
Mississippi County, which has committed $14.5 million to the steel mill superproject, has a “timing issue” tied to the availability of its funds. Presently, about $9.5 million is sitting in the bank, and the remaining $5 million will be collected before year’s end from a local half-cent sales tax for economic development.
The ADFA pledge, which will work like a short-term line of credit, assures private equity investors that the money is guaranteed today.
“Our loan commitment approval is to the company and we expect that if used, the loan will be repaid by the company with interest,” said ADFA president Gene Eagle. “We will be collecting commitment fees and loan guaranty fees as well. If used, the loan proceeds will be drawn down as needed to make approved investments in the plant construction and to be repaid over a three to four year period, possibly sooner. The company may not need to even draw down on the funding at all, but they need a commitment to close with their lenders and equity investors this Friday, June 27th.”
The funding for the $1.3 billion Big River Steel factory consists of general obligation bonds from the state, one-time monies from state and local entities, and private equity financing.
Under authority of the Arkansas General Assembly, the state has pledged $125 million in bonds, of which $70 million will serve as a grant to the project. Another $50 million will be loaned to Big River Steel through the bond issue. And, $5 million is obligated for closing costs tied to the projects.
The city of Osceola has committed $2 million to the project, while the private equity portion of the funding totals $1.25 billion in debt financing.
“We are incredibly grateful to ADFA and the board for stepping up in this situation,” said AEDC director Grant Tennille.
Big River Steel is the state’s first superproject utilizing Amendment 82, which allowed the State Legislature to offer bonds to move the project forward.
Announced in January 2013, Big River Steel is expected to employ 525 workers initially with average annual wages of $75,000. Another 2,000 construction jobs are expected to be created during the 18-month building period.