Thursday, September 26, 2019

Record-quick turnaround time locks in record-low rates for UVA

UVA made national news when it executed three bond sales, taking advantage of historically low rates and securing capital project financing for up to 100 years.

Read the full story in UVAToday.

As EVP-COO J. J. Davis mentioned in UVAToday, the sale required a team of UVA leadership and staff to move quickly to "seize the moment."
The team at the Century Bond sale at Barclay's

Before Davis, VP of Finance Melody Bianchetto, and Managing Director of Treasury Julie Richardson headed to New York City to make the historic deals, a flurry of activity, fast-tracked and involving many parties coming together, took place behind the scenes.

"This involved a level of efficiency and coordination we've never been tasked to do before," said Richardson.

"A debt issuance is usually a four-to-five month project, but when the inverted yield curve and other anomalies in the market indicated that we were looking at a historical low that wouldn't be around long, we sped up the process to achieve the low rates."

The result is that what would've normally taken 12 to 16 weeks was done in five, setting records at UVA for being the largest, quickest, and most creative deal ever closed.

What does it take to get such a deal off the ground?  Multiple banking partners to launch ti deal into the market, external legal counsel to draft hundreds of pages of documents for each deal, a financial advisor who committed herself to UVA almost full time for three weeks, a special-called meeting of the Board of Visitors, and multiple hours spent by UVA executives explaining our plan and strategy to our rating agencies to ensure the maintenance of our excellent credit score.

Staff from a variety of departments were integral in the transactions:  Gene Crouch of Treasury led coordination of the Rating Agency presentations and worked on deal structuring; Linda Vannatta of Treasury coordinated commercial paper refunding, debt proceeds, cash flows, and the impact to UVA"s Cash Projection Model; Bill Define of Financial Operations focused on the tax work and keeping UVA compliant with tax law; Richard Carter and Yvonne Metheny set up the accounting infrastructure for the transactions;  and Megan Lowe, Nancy Eagle, and Linda Moon of the EVP-COO office provided unlimited support to Davis and the Team.
Click the image for a larger view.  This chart illustrates all Century Bond
issuances since 1996 -- UVA is all the way to the right with the lowest rate!

Once the deals were put together, the Team traveled to New York for the pricing and allocation of the bonds.

"Many picture capital market transactions as a room full of traders representing buyers and sellers yelling on phones and across the room," says Richardson.

"Trading more electronic now, but with markets fluctuating in real-time, it really can be as hectic as you might imagine."

Richardson said the prospective investors had a number of questions about UVA's internal financial operations and budget.

"Melody and J.J. answered the questions about strategy, governance, and financial operations in a way nobody else could have," she says.

The team found their bonds were in strong demand; Davis, with the guidance of the chair of the BOV finance committee, finalized pricing and buyer orders were confirmed.

Now that she's back in her office, Richardson calls the entire process "exhilarating." 

"We could immediately compare the three transactions to every deal ever done, and we knew we'd not only made history but that what we did would directly contribute to the University's Strategy and Long-Range Plan."

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