BOE secures exceptional interest rate for capital improvement financing
The Mountain Brook Board of Education secured a remarkably low 2.48% blended interest rate to finance the school district's upcoming capital improvement projects, which will cost approximately $75 million.
April 19, 2021 —The Mountain Brook Board of Education on April 6 closed on the approximately $75 million bond issue that will finance the school district’s upcoming capital improvement projects. The projects will be fully funded by the additional 10-mill property tax increase that city residents approved in September 2019.
More than 70 investors purchased bonds that Mountain Brook Schools will repay at a remarkably low 2.48% blended interest rate over the next 30 years. MBS was able to secure such an exceptional interest rate thanks to the stellar bond ratings it received in March.
S&P Global Ratings assigned the district the highest available rating, AAA, placing MBS in the top 1.64% of rated school districts nationally. The rating underscored MBS’ extremely strong capacity to meet its financial commitments. With the new bond issue, the school district will pay approximately $3.5 million in annual debt service through 2051.
“We are extremely pleased with the blended interest rate we were able to achieve due to strong investor demand,” MBS Chief School Financial Officer Kari Austin said. “It will allow us to maximize the amount of funds spent on capital projects while minimizing the total paid in interest.”
The timing of the bond sale could not have been better, as it enabled the school district to optimize its interest rate and borrowing capabilities. Just two years ago, MBS only would have been able to borrow approximately $59 million — rather than $75 million — to keep its annual debt service around $3.5 million.
Furthermore, MBS has refinanced $5.8 million of existing debt from 2012 at a lower interest rate, saving the district approximately $329,000 over the next 10 years.
Matt Adams of Raymond James Financial, along with Kane Burnette and Alan Zeigler of Bradley Arant Boult Cummings LLP, have provided invaluable guidance to MBS through the bond issuance and refinancing processes.
Raymond James is underwriting the capital improvement projects, while Bradley Arant Boult Cummings LLP is serving as bond counsel.
“Matt, Kane, and Alan made this complex process as easy as it could be for us,” MBS Superintendent Dr. Dicky Barlow said. “They walked us through it step by step and strategized about selecting the ideal time to bring our bond sale to market. We cannot thank them enough for lending us their time and expertise, and are beyond excited to begin these pivotal projects.”