April 20, 2016
Saginaw Valley State University will see nearly $7 million in cost savings, thanks to timely debt refinancing and a dedication to running a fiscally responsible organization to better serve students.
In January, SVSU officials recognized an opportunity with historically low interest rates on long-term tax-exempt bonds.
“All of our financial decisions are made with students’ interests in mind,” said James Muladore, executive vice president for administration and business affairs. “This was not something we had to do, and it required a great deal of effort to achieve, but these types of actions are what have allowed us to remain affordable and provide a high quality education.”
In order to refinance $52 million in existing debt and borrow an additional $10 million for the renovation of Zahnow Library, the credit rating agencies of Moody’s and Standard and Poor’s completed extensive reviews of SVSU’s financial position.
In announcing their A1 rating of SVSU, Moody’s cited “consistently strong operating cash flow resulting in healthy debt service coverage, very good financial resource cushion relative to operations and debt, and a conservative debt structure.” (https://www.moodys.com/research/Moodys-assigns-A1-to-Saginaw-Valley-State-Universitys-MI-Series--PR_903180475)
Working with investment banker Barclays, SVSU successfully marketed the $62 million bond issue to investors. SVSU will realize interest savings of $6.8 million, more than $300,000 annually through 2038 when the long-term bonds will be fully paid off. The money borrowed for the library project is a short-term note that will be repaid within four years.
SVSU also refunded bonds in 2013 that resulted in $1.2 million in savings, and in 2015, which saved SVSU roughly $1.7 million in interest. Most of SVSU’s borrowing has been for construction, such as housing and dining facilities, and the university’s portion of state-supported projects, such as the Health and Human Services Building.