On July 1, South Texas College sold a total of $41 million in Limited Ad Valorem Tax Refunding Bonds which saved the College and taxpayers more than $3.6 million in debt service providing a reduction in ad valorem taxes to the residents in Hidalgo and Starr Counties.
The 2020 Refunding Bonds received strong ratings from two major rating agencies.
STC President Dr. Shirley A. Reed said the College’s Board of Trustees authorized her administration to pursue potential refinancing options in March 2020.
“The rating agencies acknowledged the College’s strong financial position,” Reed said. “This combined with the current historically low interest rate environment allowed the College the opportunity to save millions of dollars in interest costs. These savings will directly benefit the taxpayers of Hidalgo and Starr Counties. We continually look for opportunities to achieve debt service savings.”
Paul Rodriguez, chairman of the board of trustees of STC, said the 2020 Refunding Bonds were rated “Aa2” and “AA” by Moody’s and Standard and Poor’s, respectively.
Rodriguez pointed out that in their rating assessment, Moody’s noted that the Aa2 rating is supported by a large tax base in South Texas with stable student enrollment, a strong financial position effectively steered by a seasoned management team, and manageable debt and pension burdens.
Rodriguez said Standard & Poor’s noted that their AA rating reflects our opinion of the College’s deep and diverse property tax base, which benefits from growth spurred by international trade; strong finances with stable overall operations and very strong reserves; and good financial management policies and practices.
The sale included a total of $41 million in refunding bonds for interest cost savings to refinance the Limited Ad Valorem Tax Bonds previously issued in 2014. Overall, the transaction produced total savings of $4.4 million and net present value savings of $3.6 million with an overall true interest cost of 2.19%.
Rodriguez said the interest cost savings that resulted from this bond sale will allow for the reduction in debt service costs funded by taxpayers in Hidalgo and Starr Counties.
Hilltop Securities Inc., served as Financial Advisor. The J. Ramirez Law Firm served as Bond Counsel. Underwriters were Estrada Hinojosa as Senior Manager with Raymond James and Jefferies as Co-Managers. Underwriter’s Counsels were Orrick, Herrington & Sutcliffe LLP and The Perez Law Firm, PLLC.
Rodriguez was a recent guest on The Rio Grande Guardian’s Community Spotlight series on Zoom. In addition to discussing the refinancing of bonds, Rodriguez spoke about the upcoming Fall semester and STC’s plans to prioritize the safety and well-being of all its students, faculty, and staff in the wake of the current COVID-19 global pandemic.
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