The sale is a strong indicator of the University’s financial health, according to Martha Hirst, Fordham’s senior vice president, chief financial officer, and treasurer.
The offering was done via the New York State Dormitory Authority and overseen by Morgan Stanley. The sale achieved three outcomes that will benefit the University:
• Refinancing the $50 million maturity from a bond issued in 2011 at a lower interest rate;
• Refinancing in advance of the due date bonds that were issued in 2008;
• Freeing up $15 million in new funds to help finance the completion of the renovation of 140 West 62nd Street at the Lincoln Center campus.
Assistant Treasurer Bob Steves said the University’s move is similar to when homeowners refinance their mortgage when interest rates are low.
“When you issue tax-exempt bonds, there are some limitations as to how often you can sell, or when you can do it relative to when you originally borrowed the money. To make it worthwhile, the market has to have improved significantly from when you originally issued the bond,” he said.
“By combining these three opportunities, we were able to reduce the administrative cost of this borrowing.”
He noted that the $15 million figure was chosen based on the amount the University saved by refinancing the 2008 and 2011 bonds.
“We were very sensitive to our position in the marketplace, and sensitive to the budgetary needs of the University,” he said. “We wanted a situation where we could raise the capital without increasing the debt burden on the University.”
Current market interest rates provided that opportunity, he said. “Thanks to the sale we’re estimating the University’s interest payments over the next five years to be about $1 million less than if it had stayed the course.”
Timing wasn’t everything though. Fordham received an A2 rating from Moody’s and an A rating from Standard & Poor’s, he said, but was able to secure even lower interest rates than would normally be granted on such ratings.
Martha Hirst, chief financial officer for the University, compared it to winning a gold medal instead of a bronze it was predicted to win.
“It’s a measure of the investor’s community having confidence in the strength and solidity of Fordham as an institution to invest in,” she said.