P.M. BRIEFING : Schools to Help Bail Out Philly
Philadelphia officials scrambling for $150 million in loans to keep the city in business have been boosted by a promise of $37.5 million from state school employees.
The board of the Public School Employees Retirement System agreed by a 6-1 vote to buy a quarter of the $150 million in notes that the city wants to sell to keep it solvent this fiscal year.
Those who manage the $16-billion retirement fund expect to turn a hefty profit. “It’s a very good investment,” Bernie Freitag, board chairman, said Sunday.
Under terms set by banks that are part of a group buying the notes, Philadelphia will pay the prime interest rate, now 9.5%. But other fees, including up-front fees equal to 2% of the $150 million, will push the total return to investors much higher.
The rate of return on the first $105 million of the loan should be 26.7%, David B. Thompson, vice president of Janney Montgomery Scott Inc., told the board. The remaining $45 million carries a 25.6% rate of return to investors.
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