The Southwestern Michigan College Board of Trustees announced that last week it refinanced the debt on one of the college’s residence halls, saving taxpayers a total of $1,441,701 over the next 21 years.
In preparing for the refinancing bond sale the college, working with its municipal advisor, Bendzinski & Co., requested that S&P Global Ratings, a business unit of Standard and Poor's Financial Services LLC ("S&P") evaluate its credit quality.
Even though Moody’s, another ratings agency, had recently reaffirmed its negative outlook for the higher education sector as a whole for the second straight year, S&P assigned SMC an outstanding rating of "AA" and stable. It cited the college's adequate income indicators and extremely strong market value per share; strong general fund performance while maintaining very strong reserves; and moderate overall debt burden in its rationale for rating the college at this level.
In his President’s Report at the Aug. 19 Board of Trustees meeting, Dr. David Mathews said, “Our financial model all along was that we’d be able to build the residence halls, pay the debt service from money that comes in, pay operating expenses and build a reserve fund. Not only has housing been self-sustaining, but it has also produced additional revenue that has allowed us to do other campus improvements.
“We are always looking for ways to save money. Interest rates have gone down substantially since we initially bonded for our second residence hall,” Mathews said. “Last week’s bond sale came out even better than we hoped. It’s hard to believe we’re 10 years into the student housing business. The savings will continue to allow us to replace furniture, make repairs and paint on a regular schedule and build up a long-range replacement fund.”
“It’s a testament to (Vice President and Chief Business Officer) Susan Coulston and her department,” Chairman Thomas F. Jerdon said. “Susan is always on top of windows of opportunity in the bond market when we need to strike.”
SMC’s financing was conducted by the Michigan investment banking office of the brokerage firm, Stifel, the financial advising firm Bendzinski & Co. and the law firm serving as bond counsel, Thrun Law Firm, P.C. The college's 2019 Refunding Bonds were sold at a true interest rate of 2.56 percent with a final maturity of 2040.
Brodie Killian, Managing Director with Stifel, said, "Southwestern Michigan College’s bonds were sold at an opportune time in the bond market. The college was able to enter the bond market after a recent decline in interest rates. The financing met the goals of the college and resulted in a cost of borrowing that was considerably lower than originally anticipated.”