– by Robert Crump

The Vermont Bond Bank (VBB) is scheduled to issue $22 million in State College System Bonds this week. Series 2020A is scheduled for a negotiated sale with Morgan Stanley as Senior Manager. Proceeds from the sale of the Bonds will be used to refinance the Vermont State College System’s (VSCS) 2010B Build America Bond. Security of this bond issuance has some special features, so it will help to give background on the Bond Bank before delving into the details of the Bonds.

Vermont Bond Bank

The Vermont Bond Bank typically functions as a conduit to provide access to State government units (the state college system, in this case) with access to financial markets. Its largest loan program is the Pooled Loan Program which is used by borrowers to fund infrastructure projects in the State. The Bond Bank also operates a State Revolving Fund that is focused on financing wastewater and other natural resource infrastructure in the State. These services allow smaller borrowers to reduce the cost of financing projects by taking advantage of the bank’s favorable credit rating.

About the Bonds

VSCS Program Bonds (including Series 2020A) are secured by a special resolution specifically for VSCS bonds outside the usual loan processes described above. Series 2020A is a special obligation of the Vermont Bond Bank (VBB) and secured by a loan agreement pledging the general obligation of the VSCS. To provide further security, the Bonds are secured by a State Intercept Memorandum detailed in the official statement. In the case of default by the VSCS, the State Treasurer is instructed to intercept appropriations to the college system in order to credit debt service on the loan in a timely manner.

No other funds of the Bond Bank are available to pay VSCS Program Bonds, and the State is not obligated to pay the principal of or interest thereon and neither the faith and credit nor the taxing power of the State is pledged to the payment of the principal of or interest on VSCS Program Bonds.

Bonds maturing on and after October 1, 2031 are subject to redemption at the option of the Bond Bank, at any time on and after October 1, 2030. Bond counsel is of the opinion that interest on the Bonds are exempt from the alternative minimum tax and Vermont State tax, but has not given an opinion related to federal tax exemption. The Bonds have received a rating of Aa2 from Moody’s.

Vermont State College System

The VSCS is a network of colleges originally created by the Vermont General Assembly in 1961, although several of its component institutions were founded in the 1800’s. As of 2017, over 8,000 students were enrolled full time in the system. See the VSCS website for their full financial statements. This information and more can be found on the preliminary official statement found on MuniOS. Below is a financial snapshot of VSCS:

Provided above is a quick snapshot of financial characteristics of the Vermont State College System, courtesy of Merritt Research Services, LLC. (Merritt believes the data to be reliable but does not make any representations as to its accuracy or completeness). In addition to the Merritt information related to the featured bond, more information can be found on our municipal bond calendarcity, state, and county pages.

These facts and numbers are for informational purposes, and should not be considered an official disclosure for potential investors. Investors should consult the official statement. None of the information provided should be construed as a recommendation by MuniNet Guide, MuniNet LLC, Merritt Research Services LLC, or any of their employees. Information and analysis is for informational purposes only.

Potential investors should rely only on the official documents and figures provided in the official statement (prospectus). Although the numbers presented in this summary are primarily derived from public documents, including issuer audits, issuer reports and other public sources such as federal reporting agencies , they are not intended to replace official information presented in connection with the bond sale. Medians may differ from official sales documents due to methodology or survey base variances.