College refinances $63 million building bond

MIDDLEBURY — With interest rates at a historically low level, it’s not just homeowners who are jumping at the opportunity to refinance mortgages: this spring, Middlebury College also refinanced $63.5 million worth of facilities debt.
The Vermont Education and Health Buildings Financing Agency (VEHBFA), which helped the college refinance its bonds, reports that the college will see about $11 million in savings at present value, a refund of about 18 percent of the total cost.
Patrick Norton, vice president for finance and treasurer of the college, said the savings over time will actually be larger: he said while the current value of the savings is $11 million, the college’s cash flow savings will actually be $22 million over the next 22 years as a result of the refinancing.
The decision, said Norton, will be good for the college’s budgets.
“Over the next five years the savings is going to allow us to spend a little less from the endowment on an annual basis, immediately reduce the amount of the college’s long-term debt, and accelerate the repayment of existing debt,” he said.
Norton said the savings will help the college bring endowment spending down to 5 percent annually, which the administration hopes to achieve by 2015.
As of Feb. 29, the college’s endowment stood at $887 million, on a continued upswing from its $825 million level in late 2011 and $649 million in 2009, at the lowest point in the recession.
The facilities bond is just a portion of the $277 million that the college holds in debt, which fell to about $270 million with the refinancing.
Norton said the $63.5 million refinancing on a bond that helped to fund the construction of Bicentennial Hall, the Davis Family Library and the Axinn Center puts the college in a more stable financial place.
“As a result of this financing we build a more financially sustainable and stronger institution and we can continue to focus on our priorities, which are small classes with an overall student faculty ratio of 9:1, meeting full demonstrated financial need of every admitted undergraduate student through a generous financial aid program, and competitive compensation (salaries and benefits) for faculty and staff,” he said.
VEHBFA reported that the refinancing also accelerates the repayment plan on the bonds from an average of 17.6 to 14.1 years.
Ultimately, said Norton, refinancing has been a win-win for the college.
“We’re happy with the results,” he said. “It makes the college more financially sustainable, and keeps the quality of (the institution) high.”
Reporter Andrea Suozzo is at [email protected].

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