The bond rating of South Texas College has been upgraded one notch by Standard and Poor’s Rating Services (S&P). The bond rating of the College’s outstanding general obligation bonds was increased from “AA- with a position outlook” to “AA with a stable outlook” in conjunction with the issuance of the College’s Limited Tax Bonds, Series 2014. This upgrade applies to all the College’s Limited Tax Bonds outstanding.
South Texas College’s bond rating, which is a measure of credit worthiness that impacts the interest rate when the College borrows money, was reviewed in connection with the bond program recently approved by the voters of the College’s District. The bond election authorized $159 million in bonds for the construction and equipping of college buildings and a 3 cents additional annual tax for the maintenance and operation of the College.
Moody’s Investor Services (Moody’s) reaffirmed an Aa2 rating to the Series 2014 Bonds and the previously issued outstanding debt. The ratings by S&P and Moody’s are considered high grade and indicate that the College has a very strong capacity to meet its financial commitments.
On January 28, 2014, the College issued bonds in an amount to fund $60 million of construction and renovations. The high ratings provided by the rating agencies allowed the College to access capital at very favorable interest rates. S&P’s previous rating of AA- was a notch lower than Moody’s rating. As a result, interest rates were based on the lower rating. The upgrade placed the ratings at generally equivalent ratings and allowed the College to obtain lower interest rates, thereby saving tax dollars.
FirstSouthwest served the College as financial advisor. The underwriting firm of Estrada Hinojosa & Company, Inc. served as the senior manager. Three other underwriting firms, Jefferies LLC, Raymond James, and Stifel Nicolaus Co., Inc. served as co-managers.
South Texas College’s sustained solid fiscal management, strong operations, and strong financial position resulted in S&P raising the bond rating. According to the S&P’s report, the one notch upgrade reflects their view of the College’s successful operational tax rate referendum in Fall 2013, which grants the College more revenue capacity to support the capital and operational pressures that come with rapid growth. The rating also reflects their opinion of the College’s deep and diverse property tax base, which benefits from the growth spurred by international trade, strong student enrollment growth, and a very strong financial position.
“The College’s strong financial position is due primarily to conservative financial management and long-term planning” said Mary Elizondo, Vice President for Finance and Administrative Services. “The bond rating increase by S&P confirms that sound financial practices are utilized by the College and acknowledges the commitment to responsible financial stewardship by the Board of Trustees and President, Dr. Shirley A. Reed.”
In addition, South Texas College was recognized for the tenth consecutive year with a Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association of the United States and Canada (GFOA) for its comprehensive annual financial report (CAFR). The Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting, and its attainment represents a significant accomplishment by a government and its management. The CAFR is judged by an impartial panel to meet the high standards of the program including demonstrating a constructive “spirit of full disclosure” to clearly communicate its financial story and motivate potential users and user groups to read the CAFR.
Founded in 1993, South Texas College serves as a catalyst for regional economic prosperity and social mobility, remaining steadfast in its commitment to student success and credential completion.