Refinancing Charter School, Sims Underwrites $22 Million Bond Issue
“I would formally like to thank everyone involved in the process of refinancing our bonds on behalf of our board and most importantly on behalf of our amazing students who will benefit so much from the additional funds that we can add back into our budget every year. This will help us to accomplish our goals to completely close the learning gap for 100% of our students, assure that not only every student will be accepted into college but will receive a scholarship and will ATTEND and COMPLETE college, and that we will become a CMU school of excellence.
My Deepest gratitude to everyone.”
–Leann Hedke, School Superintendent
Summit Academy North (“The Academy) is a public school academy located in Romulus MI. The Academy began operations in September, 1998 enrolling 264 students and offering grades K‐5th. The following year (1999‐2000) the Academy added its middle school (grades 6‐9) and enrolled 729 students. In the School’s 3rd year of operation (2000‐2001) it added high school (grades 10‐12) and enrolled 850 students. Last year (2015‐16) the Academy added a virtual / on‐line program and has grown its enrollment to approximately 2,000 students in grades K‐12th.
Engaged by the Academy to refinance its Series 2005 Bonds, HJ Sims worked with the Academy to achieve the following strategic objectives:
- Reduce the Academy’s overall cost of capital
- Reduce the Academy’s overall annual debt service and improve operating cash flow
- Achieve a Present Value of Savings of 3% or greater
In order to meet the Academy’s strategic financing objectives, HJ Sims produced and evaluated multiple refinancing structures and scenarios. The Academy elected to move forward with a fixed rate, tax exempt bond issues (the “2016 bonds”) with the same maturity as the bond issue to be refunded (the 2005 bonds). The bonds are rated BB/Stable outlook by Standard and Poor’s. HJ Sims worked with Standard and Poor’s during the financing process to reaffirm its BB rating.
HJ Sims successfully priced the $22,435,000 refunding issue with a True-Interest-Cost of 4.90%. On a present value basis, the refunding saved Summit Academy North approximately $824,000, or 3.6% of the par amount of the refunded bonds. On an annual basis, the refinancing saves over $74,000. The refinancing successfully met the Academy’s objective of reducing the cost of capital, reducing annual debt service and improving cash flow while achieving a present value of savings exceeding 3%. Summit Academy North is now able to invest more money in its school operations.
The current interest rate environment makes this an ideal time to consider refinancing your debt. Summit Academy North’s refinancing successfully met the Academy’s objective of lowering its cost of capital, reducing annual debt service and improving cash flow.
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