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Lincoln University takes step to reduce its bond debt

Lincoln University takes step to reduce its bond debt

March 22nd, 2019 by Bob Watson in Local News

A view of Lincoln University's campus is seen here from the dome of the Missouri State Capitol in Jefferson City.

Photo by Julie Smith /News Tribune.

Lincoln University administrators hope to save $300,000 by refinancing $16.5 million-$17 million in bonds originally issued in 2007.

During a telephone conference call Thursday afternoon, the board voted 5-0 to have two bond underwriting firms — R.W. Baird and Loop Capital — investigate the possible refinancing, prepare documents needed for a refinancing, and determine the best interest rates the school could get in selling the current bonds.

"It's basically a restructure of our current debt," Sandy Koetting, LU's vice president of Administration and Finance, told the News Tribune. "It will not eliminate debt-service — it will just reduce the debt-service."

She said current interest rates make the change a favorable one — as long as the costs associated with the change don't erase the projected savings.

Koetting told curators that refunding the 2007 bonds likely would be the first of several financial steps Lincoln takes — but it was the only one the board discussed Thursday.

"What we are looking at is to move through this process relatively quickly," she said, "so that we could get any savings — or, as much of the savings as we possibly could — in refunding."

Representatives of Hilltop Securities of St. Louis and Arkansas-based RSI Group discussed some of the preliminary work they've done since LU hired them as financial consultants earlier this year.

Chris Collier of Hilltop Securities told curators: "We would be looking at Baird and Loop to ultimately price the bonds and structure the bonds for their clientele — that produces the best all-in costs to the university.

"If the savings isn't there, the university is not obligated to move forward with the transaction."

Refinancing could involve any of three different options, Koetting told the board — public financing, private financing or using the HBCU (historically black colleges and universities) Capital Financing program.

"If you can find somebody who does a private placement" of the bonds, she explained, "that cuts down on the costs and the timing.

"If you go through the private, it's a faster process and potentially greater savings."

However, with an 18-year payout, she added, many private bond buyers won't be interested.

The 2007 bond issue that would be refinanced is held by public buyers — and that likely is the option the board will be asked to approve in about two months, Koetting said, noting the HBCU funding has been ruled out for now since its use requires some money to be placed in an account that's shared with other schools.

Mobley told the board: "You have all the HBCUs that are in need of cash for projects fighting for the same dollars.

"And it's very subjective — they can decide if they want to let you into the program or not. It's a very labor-intensive process that doesn't always go in your favor."