Standard & Poor’s Global Ratings and Moody’s Investors Service have both assigned the highest quality ratings, AAA Stable and Aaa Stable respectively, to Collin College’s Series 2018 Limited Tax Bonds. This top rating led to the college finding a favorable market for the competitive sale of its $234.25 million par 2018 Limited Tax Bonds, marking the first bond issuance from the 2017 bond authorization.
Bid price saves taxpayers money
The college attracted bids from some of the largest Wall Street firms and syndicates, attesting to the institutional investment quality of the bonds. The winning bid price, submitted by Bank of America Merrill Lynch, was 3.29% including costs of issuance for the serial bonds with a maximum maturity of 20 years. The bid price also includes a premium over par of $16.3 million which allows the college to issue par debt of $234.25 million, generate $250 million for construction, and pay the costs of issuance from the proceeds of the transaction.
The 2018 Limited Tax Bonds will provide funds for expenses incurred in constructing the college’s Public Safety Training Center as well as beginning construction on two new campuses—the Technical Campus and the Wylie Campus.
The S&P Global Rating also included an upgrade in the financial management assessment of the college from “good” to “strong” based, among other factors, on the Collin College Board of Trustees’ adoption of a formal debt management policy; sound financial management practices which include monthly monitoring of financial position, results of operations, investment earnings, and investment holdings by the Board. While assigning the AAA Stable rating to the Series 2018 Limited Tax Bonds, S&P Global Ratings also affirmed the AAA Stable rating on the college’s previously issued debt.
According to Collin College District President Dr. Neil Matkin, the exemplary long-term credit ratings illustrate that the college is an exceptionally stable institution.
“We continually work toward improving our transparency, and I applaud our Board of Trustees for their stewardship, innovation, and support,” Matkin said. “Collin College is one of only three community colleges in the state of Texas that has a AAA rating for bonds. The top rating opened the door for favorable market bids, and we are pleased to pass down the interest savings to our taxpayers.”
Repayment terms structured to lower borrowing costs
According to Kenneth D. Lynn, Collin College chief financial officer, in addition to obtaining an extremely favorable interest rate, the college also created unique structured repayment terms. Special call features on bonds maturing in 2035-2038 will give the college an opportunity to pay off long-term debt that carries the highest interest rates as early as 2022 and save significant interest costs for taxpayers.
“The bonds maturing in 2027-2034 have a nine-year call feature and are callable after August 15, 2027, should the college find a favorable economic opportunity,” Lynn said. “The college is positioned to repay the debt in a manner that will lower our borrowing costs and responsibly exercise our stewardship of taxpayer resources in providing quality academic and workforce training to Collin County.”