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This private, liberal arts university used a tax-exempt bond to finance six separate master plan projects on campus including renovations to three buildings, a new athletic field, construction of a new performing arts center, and various energy savings projects. Portions of the debt funding the athletic field, arts center and energy savings projects are being repaid over 10 years from the proceeds of a capital campaign, while the balance is being repaid over 20 years from operating cash flow. Bond proceeds were drawn down over three years, and the amortization was then based on the final amount drawn for each project. Overall, the 26% lower interest rate allowed the university to realize present value savings of over $750,000 compared to conventional financing and reduce its debt service costs by $70,000 annually.
The bank worked with a private day school to refinance its existing debt and fund renovation costs of a classroom building. The refinancing tranche of the bond began amortization over ten years upon closing, while the renovation costs were drawn down over a three-year period and begin amortizing once the first tranche is paid off. This structure allowed the school to incorporate future capital expenditures in the bond. The debt was structured with a fixed rate that resets periodically based on a formula. Altogether, the school saved over $600,000 by using the bank’s direct purchase bond structure and enhanced its savings by including future expenditures instead of waiting to issue a second bond.
This 75-year-old community services provider had recently completed construction of a brand new 60,000 sq. ft. facility using conventional debt. First American Bank proposed using direct-purchase bonds to refinance the $5.3 million construction loan and finance the addition of a new $2.9 million 30,000 sq. ft. aquatic center. The bank worked with our not-for-profit customer to structure the bonds, including finding a governmental issuer, selecting bond counsel, and coordinating the whole process. The 20-year bond issue was a floating rate, and the borrower executed a 10-year interest rate swap to minimize interest rate risk and provide certainty to their cash flows. The savings generated through use of tax-exempt bonds reduced their borrowing costs by over $125,000 annually.