Given Tuesday’s news that Los Angeles County will issue $14 million in bonds as a loan to the cash-starved Los Angeles Opera, some L.A. Opera fans might be wondering whether this could be an opportunity to do well by doing good.
Invest in a bond that helps tide the opera over while it solidifies its finances and pays down about $20 million in debt, and bank some attractive interest as your reward. At an interest rate of almost 5%, that’s a heck of a lot better than you can get from a certificate of deposit or a U.S. Treasury bond.
If that sounds too good to be true, well, it is. The bonds are a “private placement,” and the deal will work like this: On Friday, the Los Angeles County Public Works Financing Authority will issue the bonds. Banc of America Leasing & Capital LLC, will buy them all for $14 million, and the county will pass the bank’s cash along to the opera on the same day.
Twice a year for the bonds’ three-year term, the opera will fork over interest at a pre-arranged rate of 4.7%, and the county will pass it along to Banc of America. The interest will total a tad less than $2 million. The principal will be paid in a single lump sum at the beginning of 2013.