The Anderson County School District No. 1 became the first South Carolina issuer to sell Build America Bonds on Tuesday in a deal that could save $4 million over traditional tax-exempt financing, the school’s financial adviser said.
The district sold $25 million of BABs competitively after bidders were asked to offer proposals for either BABs or traditional tax-exempt bonds.
After computing all bid submissions, the district chose to award the bonds as taxable direct payment Build America Bonds as opposed to traditional tax-exempt debt, according to an analysis prepared by financial adviser Sinclaire & Associates LLC, which said the BAB structure was a “far more cost-effective alternative.”
Morgan Keegan & Co. won the bid for the BABs with a true interest cost to the issuer of 5.88%, or 3.82% when including the 35% federal subsidy. The school district’s tax-exempt alternative was 4.76%, though it only received one bid for tax-exempt financing.
The result over the life of the bonds is a net savings of $4.23 million, according to a Sinclaire & Associates’ analysis.
“We are not only pleased with the outcome of this groundbreaking financing method, but are extremely honored to be the pioneer issuer of open-market Build America Bonds for South Carolina,” school district superintendent Wayne Fowlert said in a statement.
The bonds, callable at par in March 2019, are rated A2 by Moody’s Investors Service and A-plus by Standard & Poor’s.
McNair Law Firm PA served as bond counsel.
