Tennessee School Bond Authority’s $713 million sale nets record savings

The Tennessee State School Bond Authority netted a record low interest rate on its largest ever bond sale, which will save state colleges and universities almost $112 million in net present value interest cost savings over the next 24 years.

Jefferies priced the authority $713.4 million of taxable higher education facilities refunding bonds the week of Feb. 8 and it closed on Wednesday. The taxables sold at a true interest cost of 2.03%.

Comptroller Jason Mumpower says the savings generated by this sale were unprecedented.

The timing was fortuitous — 10-year Treasuries rose 23 basis points between pricing and closing to 1.39%, according to Refinitiv data.

The bonds were structured as serials and terms maturing between 2022 and 2045. Because of strong ratings and robust investor interest, most of the maturities were cut by at least five basis points at the repricing, the state said.

The deal was rated Aa1 by Moody’s Investors Service and AA-plus by both S&P Global Ratings and Fitch Ratings.

The authority said the aggregate net present value savings of $111.8 million represented 18.5% of the refunded bonds.

“The pandemic has caused unique challenges for our state’s public colleges and universities,” Comptroller Jason Mumpower said. “The savings generated by this sale are unprecedented and
will have an immediate and lasting impact.”

Most of the proceeds will be used to refund or refinance outstanding bonds with a small portion going toward the purchase of an existing bio-works facility for the University of Tennessee Health Science Center in Memphis.

The bonds will be repaid with revenues generated by projects that were originally financed by bonds issued for Tennessee’s public higher education institutions.

“Tennessee’s commitment to stewardship is again paying off in a big way despite the disruptions from COVID-19,” said Gov. Bill Lee. “These funds result in more than $100 million that directly support critical needs for higher education and I commend Comptroller Mumpower and his team for their work.”

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