A city board on Thursday helped the University of Tennessee at Chattanooga's foundation refinance bonds used to build five dormitories - which could save $5 million to $7 million over the next 20 years.
The city's Health Educational and Housing Facility Board unanimously voted to approve tax-exempt bonds for the UC Foundation to refinance about $70 million worth of bonds used to build five undergraduate dormitories between 2001 and 2004 south of McCallie Avenue: Guerry, DeCosimo, Stophel, Walker and the UC Foundation Building dorm. The dormitories total 1,749 beds.
The city doesn't have any money at stake in the deal; the bonds won't be backed by any pledge of city revenues or taxes.
Bryan Rowland, executive director of the UC Foundation, Inc.The UC Foundation decided to refinance the bonds because of "the positive nature of the bond market right now; the interest rates are at a very low point," the foundation's executive director Bryan Rowland said.
The foundation's bond attorney, Mark Mamantov of the Knoxville office of Bass, Berry and Sims, told the board the refinancing could save the foundation "millions." After the meeting, he said the savings over 20 years could be $5 million to $7 million, depending on the market when the bonds are sold on Oct. 21.
Standard and Poor's has given a BBB rating to the pending bond sale, while Fitch Ratings has given it a BBB-, Mamantov told the board.
"That's not junk debt, that's investment-grade debt," he said. "This [dorm] project has turned out to be very successful."
Raymond James is the UC Foundation's bond broker, Rowland said, and it will sell the bonds on Oct. 21.
The dorms house UTC students but are owned by the UC Foundation.
Another school taking advantage of favorable interest rates on Thursday was McCallie School, an elite, boys-only private college prep school on Dodds Avenue, for such improvements as new buildings and improvements to athletic facilities.
The board approved refinancing $35 million worth of bonds McCallie sold for capital projects in 2009 and 2010.
"You should have put a little more money into that football team," joked HEB Chairman Hicks Armor, referring to McCallie's recent 35-14 gridiron loss to crosstown prep school rival, Baylor School.
The HEB is the conduit through which McCallie will refinance its debt to SunTrust Bank.
"We're only the vehicle," Armor said. "We have no liability."
The city's Health Educational and Housing Facility Board is a legally separate public corporation whose members are appointed by the mayor, said Gary Lander, a retired attorney who represented the board in the 1970s and early 1980s.
It has the authority to issue bonds and lend the proceeds to various private entities such as housing facilities, hospitals, and schools, Lander said. Interest on its bonds is exempt from federal income tax, just like municipal bonds issued directly by cities and counties, which makes them cheaper than private lending.
Contact staff writer Tim Omarzu at tomarzu@timesfreepress.com or www.facebook.com/MeetsForBusiness or twitter.com/meetfor business or 423-757-6651.