ADAMS TWP — An improved bond market will make the Mars School District’s termination of their last large financial swaption a better deal.

Tom King explained that the deal has two parts: the termination of the 2006 swaption that carries a fee of $3.5 million, and the refinancing of several old bonds totaling $13.8 million.

The board in December had planned to pay the swaption termination fee using $2.4 million that was saved from unspent proceeds of a 2002 swap deal, then roll the remaining amount into the bond finance sale.

But on Friday, King said the bond market unexpectedly improved since Mars’ financial experts visited the board in December.

That improvement in bond rates means that Mars will see a savings of $250,000 after the two deals are made at the closing on Feb. 20, King said.

“Basically the savings on the refinance was more than the difference between the termination fee and the ($2.4 million) the district had saved,” King said.

“We are very pleased,” school board President Dayle Ferguson said at Tuesday night’s board meeting. “This will have no impact on our budget.”

While the Feb. 20 deal will represent the last of the district’s three swaptions, two base swaps from 2005 remain. One is a $12.8 million deal, and the other is for $7.4 million.

Financial swaps are not the same as a swaption.

Mars was able to terminate their swaptions with relative ease compared to the Butler School District, whose board members in 2008 voted to pay $5.7 million to terminate a swaption deal.

In November 2009, then-state Auditor General Jack Wagner railed against the deals, and asked the legislature in Harrisburg to ban any swap-type deals for school districts, municipalities or authorities. The ban was not approved.

Swaptions are tempting because they offer a significant up-front payment, but risky because the eventual financial outcome is based on future interest rates.