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Purdue converts debt on bonds to fixed rate for $4.6 million savings | Business News | Lafayette Online
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News | Business News

Purdue converts debt on bonds to fixed rate for $4.6 million savings

WEST LAFAYETTE, Ind. — Purdue University has converted $81.75 million in outstanding student fee bonds from variable-rate to fixed-rate debt, saving Indiana $4.6 million.

Purdue’s financing team was able to convert the debt to a historically low long-term fixed rate of 3.47 percent, said James Almond, senior vice president for business services and assistant treasurer.

Purdue issues bonds for academic, athletic and residence hall facilities. The state of Indiana provides Purdue an appropriation to offset the cost of debt for academic facilities that the state financially supports. The savings on the actual debt service relative to the appropriation goes to the state.

“The state appreciates Purdue’s efforts to return appropriations because of debt service savings,” said Christopher Ruhl, state budget director. “Realizing the savings at this time is extremely beneficial given the current fiscal environment.”

In the 1980s, Purdue was the first university to issue variable-rate bonds, which are reset every seven days at a short-term interest rate. This financing strategy has saved millions of dollars over the years, Almond said. In fact, during fiscal years 2007-08 and 2008-09, Purdue returned $7.2 million to the state through the use of variable-rate debt financing.

“Through the active management of the debt program, the state has benefitted from low short-term rates in recent years. This refinancing secures a very attractive low long-term fixed rate,” Almond said.

“A patient and thoughtful approach over the years has enabled the university to lower its cost of financing.”

With the $4.6 million in savings for fiscal years 2009-10 and 2010-11, the total Purdue will return to the state for the fiscal years going back to 2007-08 is $11.8 million.

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