Marian University Indianapolis
|Deal Type||Debt Capital Markets|
Tax-Exempt Series 2019A
Taxable Series 2019B
|Client & Transactional Partners||
Marian University Indianapolis
Indiana Finance Authority
|Our Role||Sole Manager|
On August 27, 2019, KBCM priced $119.4 million Educational Facilities Revenue and Refunding Bonds (Marian University Project), consisting of $16.0 million Tax-Exempt Series 2019A and $103.4 million Taxable Series 2019B Bonds (collectively the “2019 Bonds”). The 2019 Bonds were issued to (i) advance refund Marian University’s (“Marian” or the “University”) Indiana Finance Authority Educational Facilities Revenue Bonds, Series 2011 (the “2011 Bonds”); (ii) fund various new money projects on the University’s campus, including a new residence hall, purchase of a graduate apartment facility, and other capital improvements on campus; (iii) fund a Debt Service Reserve Fund; and, (iv) pay certain costs of issuance. The 2019 Bonds were secured by the University’s absolute and unconditional obligation to make payments to the Indiana Finance Authority under a Loan Agreement customary to financings of this nature as well as a fully funded debt service reserve fund.
The University utilized the significant annual savings of the taxable advance refunding (the “Taxable 2019B Bonds”) to fund the new money projects and essentially cover the debt service on the tax-exempt series (the “Tax-Exempt 2019A Bonds”). The net result is that the University will now pay approximately $300,000 less in debt service annually but was able to generate over $17.0 million in bond proceeds to fund strategic initiatives on the Marian campus.
KBCM arranged comprehensive investor teach-ins and prepared an investor roadshow prior to pricing. KBCM was able to aggressively modify the University’s financial covenants from the Series 2011 Bonds by not only eliminating Marian’s liquidity covenant but also reducing the University’s debt service coverage ratio from 1.20x to 1.10x in order to afford the University future operational flexibility.
Our salesforce and municipal underwriting team canvassed a broad universe of traditional municipal buyers as well as “crossover” buyers (buyers that conventionally purchase corporate securities but pursue taxable municipal offerings) in order to achieve the lowest yielding structure for the University. By the end of the order period, the tax-exempt transaction garnered over $80 million in total orders, representing an oversubscription of 5.1x. As a result, KBCM’s Underwriting team was able to reprice the Tax-Exempt 2019A Bonds to lower yields by as much as 10 basis points across the curve.
Similarly, for the taxable series, the transaction received approximately $480 million in total orders, resulting in an oversubscription of 4.6x. Given the robust investor interest in all maturities on the Taxable 2019B Bonds, KBCM was able to cut yields by between six to 12 basis points from the initial order period. The end result of the advance refunding of the 2011 Bonds was gross debt service savings of over $27.9 million or $19.5 million in net present value savings (20.4% of refunded par). The refunding of the 2011 Bonds resulted in average annual savings for the University of approximately $1.2 million.
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