HOUSE BILL NO. 258
AN ACT TO AMEND CHAPTER 303, VOLUME 66, LAWS OF DELAWARE, BEING SENATE BILL NUMBER 480 OF THE 134TH GENERAL ASSEMBLY, AND BEING ENTITLED, AN ACT MAKING APPROPRIATIONS FOR THE EXPENSE OF THE STATE GOVERNMENT FOR THE FISCAL YEAR ENDING JUNE 30, 1989: SPECIFYING CERTAIN PROCEDURES, CONDITIONS AND LIMITATIONS FOR THE EXPENDITURE OF SUCH FUNDS: AND AMENDING CERTAIN PERTINENT STATUTORY PROVISIONS", BY MAKING ADDITIONS THERETO AND AMENDING TITLE 29 WITH RESPECT TO THE RETIREMENT OF GENERAL OBLIGATION DEBT.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend Chapter 303, Volume 66, Laws of Delaware, being Senate Bill No. 480 of the 134th General Assembly, by making the following additions to State Treasurer, Debt Management (12-05-03) in Section 1:
"1989 Defeasance of Bonds $24,209,056"
Section 2. Amend Chapter 303, Volume 66, Laws of Delaware, being Senate Bill No. 480 of the 134th General Assembly, by adding thereto a new section to read as follows:
"Section 324. Section 1 appropriates $24,209,056 to the State Treasurer, Debt Management (12-05-03) for 1989 Defeasance of Bonds. The appropriation shall be applied to retirement of general obligation bonds issued by the State of Delaware prior to May 3, 1978. The funds appropriated hereby shall be applied (1) to the purchase of securities to be deposited in trust to accomplish an in substance defeasance of said bonds which shall cause said bonds to be deemed retired for the purposes of Section 7423 of Title 29 of the Delaware Code, (11) to the transaction costs associated with accomplishing said defeasance, and (111) to the cost of issuing approximately $45 million of the State's general obligation bonds - Series 1989 (College Savings Bond Program) at or about the same time as the accomplishment of the aforesaid defeasance. Notwithstanding the provisions of Section 2617, Title 29 of the Delaware Code or any other law to the contrary, the Secretary of Finance is hereby authorized on behalf of the State, pursuant to such procedures and subject to such terms and conditions as he shall deem in the best interest of the State, to acquire the aforesaid securities for deposit in trust, to identify the bonds of the State to be retired with the proceeds of the trust assets, to waive the right of the State to redeem any such identified bonds prior to their stated maturities, to select a financial institution to serve as trustee and to do all other things reasonably related to the retirement of bonds with the proceeds of this appropriation."
Section 3. Amend Section 1 of Chapter 303, Volume 66, Laws of Delaware, being Senate Bill No. 480 of the 134th General Assembly, by recomputing all subtotals and totals to reflect the amendments made by this Act.
Section 4. Amend §7423 of Title 29, Delaware Code to insert "(a)" before the existing first paragraph of §7423 and to add the following new subsection (b):
"(b) For the purposes of this section bonds shall be considered retired if (i) they have been paid in full at maturity or upon earlier call for redemption or (11) if at maturity or earlier call for redemption sufficient funds are on deposit to pay such bonds in full or (111) there shall have been irrevocably deposited in escrow with an independent trustee funds which, together with the earnings thereon, but without regard to any reinvestment earnings, will be sufficient to pay the principal, premium if any, and interest on such bonds, when due at maturity or upon earlier call for redemption (provided that notice of such redemption has been given or irrevocable instructions to give notice of such redemption have been given to the trustee). Funds deposited in escrow pursuant to clause (111) may only be invested in the following obligations or securities:
(1) direct obligations of, or obligations the principal of and the interest on which are unconditionally guaranteed by, the United States of America and entitled to the full faith and credit thereof; certificates, depositary receipts or other instruments which evidence a direct ownership interest in obligations described in clause (1) above or in any specific interest or principal payments due in respect thereof; provided, however, that the custodian of such obligations or specific interest or principal payments shall be a bank or trust company organized under the laws of the United States of America or of any state or territory thereof or of the District of Columbia, with a combined capital stock surplus and undivided profits of at least $50,000,000 or the custodian is appointed by or on behalf of the United States of America; and provided, further, that except as may be otherwise required by law, such custodian shall be obligated to pay to the holders of such certificates, depositary receipts or other instruments the full amount received by such custodian in respect of such obligations or specific payments and shall not be permitted to make any deduction therefrom;
(3) obligations fully guaranteed by the United States of America;
(4) repurchase agreements with respect to obligations listed in clause (1), (2) or (3) with a bank or trust company or any, securities dealer which is a member of the Securities Investors Protective Corporation or is covered by another similar federal insurance program; provided however that such obligations must be held by the trustee or other agent of the State in certificate form or by an entry on the books of the issuer of such obligations; and the collateral security must continuously have a market value at least equal to 102% of the amount due under the agreement and the collateral must be free of third party claims and provided further that in the case of a bank or trust company, such institution must have ratings from Moody's or Standard & Poor's in one of their three highest rating categories and in the case of a securities dealer, such dealer must be a member of the National Association of Securities Dealers, Inc. or another similar trade organization; and
(5) an investment contract with a financial institution or insurance company with a rating from Moody's or Standard & Poor's in one of their three highest rating categories provided that such contract is collateralized with obligations described in clause (1), (2) or (3), such collateral is held by the trustee or other agent for the State along with stock powers or other appropriate authority to transfer said collateral to the State in the event of a default, such collateral must continuously have a market value at least equal to 102% of the amount due under the contract and the collateral must be free of third party claims."
Approved April 27, 1989.