Adams State refinances debt

ALAMOSAThe Adams State Board of Trustees unanimously approved a debt restructuring proposal at a special teleconference meeting on Tuesday. The plan is to achieve near term cash flow savings while minimizing future spikes in aggregate annual debt service.

The board’s finance committee reviewed three different plans before settling on the one with the least financial risk. According to Stephanie Chichester, financial advisor and president of North Slope Capital, ASU will buy the debt for three years for roughly $1 million a year. It lowers the debt service from $5 million to $4 million and moves the principal further down the timeline.

“We’re moving the can down the road a ways but it does buy us breathing room,” said board member Reeves Brown, “and it puts us in a position in three years where we are able to institute real savings.”

Most of the dollars are tax-exempt. However there is $1,830,000 taxable because the IRS limits ASU to one tax-exempt refunding per bond.

The university is banking on future improvements to make the refinancing worthwhile.

“It seems to be the right thing to do,” board member Cleave Simpson said, “but make no mistake about it that we have got to focus on retention and recruitment for all of these strategies to come together. Or we continue to put Band-Aids on this going forward.”

Simpson is also a member of the finance committee that selected the proposal.

“If we stay status quo or see a decline in enrollment, there aren’t a whole lot of options left,” said Simpson. “If we can’t generate revenue we’ll end up having to do cost saving measures somehow, somewhere.”

ASU President Beverlee McClure is optimistic. “While enrollment is still down,” said McClure, “we’re not as far down as we were. We’re at least going the right direction. We’re confident that in the next three years we’ll see more improvement.

“We will have been through our Higher Learning Commission visit, we have new programs coming on board, and we are hopeful that our public-private partnerships will start to generate revenue.”

By 2020 ASU will have an opportunity to restructure other bonds as well to save money.

The resolution was presented to the bond credit rating agency Moody’s last Friday and ASU will have a credit rating on hand on May 4. They hope to be on the market as early as May 8 and lock in interest rates before May 15.

Graph courtesy of Adams State University