As part of a growing trend of small institutions using the swap market, Phillips Academyin Andover priced $40 million in synthetic fixed-rate bonds last month for $59.9 millionin variable-rate demand revenue bonds that it's pricing this week.
The Series 2003 bonds include around $20 million in new money for capital projects andaround $40 million to refund bonds sold in 1993. The deal is being sold through theMassachusetts Development Finance Agency with George K. Baum & Co. as underwriter.
Moody's Investors Service affirmed the academy's Aaa rating. It also assigned a VMIG 1short-term rating based on a standby bond purchase agreement with the Bank of New York.
"Phillips consistently ranks among the top two of Moody's-rated independent schools interms of total resources and among the top six in terms of total resources on a per-student basis," the agency said. It said the academy has total debt of $60 million.
According to the underwriter, Phillips Academy competitively bid two swaps on the $40million in advance refunding bonds, with one of the agreements going out five years andthe other 30 years. George K. Baum also structured the competitive swap and said theacademy locked in an all-in cost of less than 4% on the bonds by using the swap. Itsaved about 80 basis points by not using conventional fixed rates.
According to Baum, the academy receives The Bond Market Association municipal swap indexfrom the counterparty until 2008 and 67% of the London Interbank Offered Rate for theremainder of the deal. The deal was structured this way to correspond with the 2008 calldate on the underlying bonds.
