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SAU to Save Millions from Bond Refinancing

The Southern Arkansas University Board of Trustees approved Wednesday, June 11, 2014, a $10 million bond sale that will produce an annual average savings of $105,745 annually over the next 20 years for SAU.

MAGNOLIA – The Southern Arkansas University Board of Trustees approved Wednesday, June 11, 2014, a $10 million bond sale that will produce an annual average savings of $105,745 annually over the next 20 years for SAU.

The bond issue will close by June 30, 2014, and will give SAU the capability to pay off the original bond issue from 2003 to become the sole owner of the SAU University Village Apartments. Covenant Group originally financed the University Village facilities and have been leasing the property to SAU.

“The 2014 bonds will produce a gross savings of $2.1 million and a net present value savings of $1.3 million for the University when compared to what we were paying to the Covenant Group,” said Paul McLendon, SAU vice president for finance. “These savings reflect a net present value benefit of more than 13.1%. Typically, when the net present value savings exceeds 3%, it is considered feasible to refinance a bond issue. In this case, the savings were much higher than that minimum.”

McLendon gave an example of the annual savings in that for 2014-15, the University would have paid the Covenant Group a total of $813,013 in principal and interest. But based on this bond issue, the amount SAU will pay in 2014-15 now will only be $708,824.

Stephens Inc. of Little Rock is facilitating the selling of the bonds. According to McLendon, results are already better than the preliminary structuring and price report that was sent out to all the of SAU Board of Trustees prior to the Board meeting.

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