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<br />JA-4 <br /> <br />Continued from Page 3 - Early Repayment of VLF Gap Loan... <br /> <br />interest earnings, above what will be needed to repay the notes. The discounts that <br />local agencies had to accept will be made up or will shrink considerably. <br /> <br />The repayment funds for the securitized agencies will be invested until the date <br />the notes mature on November 15, 2006. At that time, investors will be paid for the <br />notes they hold. Residual funds, including the unexpected interest earned from the early <br />repayment, will be distributed on a pro rata basis to the agencies that securitized the <br />loan. California Communities is working with bond counsel to determine whether the <br />use of the repayment funds can be structured in a way that would allow all or a portion of <br />this residual amount to be paid shortly after the state payment. Participants will be <br />notified of the timing and amount of payment as soon as possible. <br /> <br />An additional twenty-six cities had enrolled in a second VLF gap loan financing <br />that was scheduled to close in early August. With the new knowledge that repayment <br />will be funded in this year's state budget, cities have an opportunity to reconsider their <br />decision to securitize. If repayment is expected to come early in the fiscal year, <br />something the League is still attempting to confirm, the second financing will most likely <br />not be issued. <br /> <br />4 <br /> <br />.~. "T'" <br />