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Students engage with investment banking and finance professionals from Raymond James and PFM Financial Advisors LLC. Luke Tandy ’22 (center) is a business administration major.<\/p><\/div>\n
Furman\u2019s Business Block students, other students from accounting, economics and Furman\u2019s Investments Club, faculty, administrators, financial advisors, underwriters and more gathered as the public auction for 30-year municipal bonds went live.<\/p>\n
It\u2019s the first time Furman has opened its financing process to the campus community.<\/p>\n
\u201cStudents were able to see the market \u2013 the demand for the bonds, and this is something students rarely, if ever, have the chance to witness on college campuses,\u201d said Susan Maddux, Furman vice president of finance and administration.<\/p>\n
But that demand for bonds could have been derailed by \u201cthe headlines of the day,\u201d she added.<\/p>\n
![\"white](\"https:\/\/news.furman.edu\/wp-content\/uploads\/2022\/01\/Susan-Maddux-400.jpg\")
Susan Maddux, vice president of finance and administration<\/p><\/div>\n
Fortunately for Furman and investors, it was a good day. No bombshell news on or leading up to the day materialized. Investors such as Vanguard, Fidelity and others saw Furman and higher education as a safe bet, and the markets stable enough to purchase $67.3 million in premium bonds with a 4% coupon.<\/p>\n
Prior to the bond pricing event, the students attended a Tuesday morning bond basics session led by Raymond James, underwriter for the bond issue, and PFM, Furman\u2019s financial advisor. Another session was held Tuesday afternoon to accommodate additional students. Both sessions in \u201cBonds 101\u201d unpacked bonds and how they are priced.<\/p>\n
A bond can be viewed as an IOU between the borrower, in this case Furman, and the investors, which can be individual investors and institutional ones such as Fidelity, BlackRock and Vanguard. When bonds are issued, the borrower promises to repay the total par (or face) value of the offering, and vouches to pay investors semiannual interest until the bonds mature. Bonds represent a low cost of capital for the borrower while delivering low-risk, tax-exempt fixed income to investors.<\/p>\n
But, as the students learned during the event, just how much risk investors will assume is the key to understanding how bonds will be priced and the interest Furman will be obligated to pay over the life of the bonds.<\/p>\n
Months ahead of the actual bond release date, much of the legwork had already taken place among Furman administration, PFM and Raymond James to ensure Furman put its best foot forward on pricing day and prove to investors that the university can make good on its obligation.<\/p>\n
Chief among the tasks for the bond issuance team was securing a favorable credit rating, which is critical in determining how much Furman will pay in servicing the debt. The rating \u2013 a report card of sorts \u2013 reflects how risky the bond or borrower is.<\/p>\n
Independent agencies such as Moody\u2019s Investors Service, Standard & Poor\u2019s, and Fitch Ratings set the ratings. Furman came to market with an A1 Moody\u2019s rating and a rating of AA- from Fitch, both deemed strong investment grade categories.<\/p>\n
Among other factors, Maddux attributes Furman\u2019s high rating to its financial stability and its ability to bounce back from COVID-19 challenges. \u201cWe have managed COVID well,\u201d she said. \u201cWe have been in-person since August of 2020 and haven\u2019t missed a beat since.\u201d<\/p>\n
Unique learning experience<\/strong><\/p>\n Furman President Elizabeth Davis<\/p><\/div>\n Furman President Elizabeth Davis joined the 40-plus students and others at the bond pricing event. \u201cThrough this hands-on experience,\u201d she said, \u201cour students learned how this works \u2013 the tradeoffs, market instability, inflation, and how all of this affects investors \u2013 applying what they have learned in the classroom in a real-world, high-stakes situation that was truly unique. Learning experiences like this help to prepare our students for any career they might pursue.\u201d<\/p>\n Mark Bettner, visiting professor of accounting, agreed. \u201cThis was a real experiential link for students to the outside world \u2013 not a textbook thing,\u201d he said. \u201cStudents were able to be right there in the thick of things, being exposed to some pretty interesting and, at times, proprietary information.\u201d<\/p>\n Bettner said bonds provide an important lesson in how and why fixed-income investments can and do have volatility in their value in the marketplace.<\/p>\n \u201cThe bond buying and selling process is really fundamental to understanding how a range of other things are valued, from pension fund valuations to common stock, preferred stock valuations, and so on,\u201d he added. \u201cIt was a great lab experiment for students.\u201d<\/p>\n Students took copious notes, lobbed questions and engaged with representatives of Raymond James, PFM, Furman Trustee David Hauser \u201973 (former CFO of Duke Energy), and others as orders for Furman bonds came in during an hour-and-a-half window.<\/p>\n \u201cThis is how it really works,\u201d Hauser said. \u201cI\u2019ve done this a lot of times, and this is the negotiation every time. You go out on a price, and you usually are able to come in a little bit, and that\u2019s the negotiation. So, I think it\u2019s wonderful that the opportunity was provided, and the number of questions and comments we got from students I thought was great.\u201d<\/p>\n Julia Blakely ’23, business administration<\/p><\/div>\n Julia Blakely \u201923, a business administration major from Boston, said, \u201cI thought it was really fascinating to get a look behind the scenes \u2013 something we wouldn’t normally see as students. Being able to see how the funds are generated to build new buildings, and learning about basis points and credit spreads was super interesting. I walked into this knowing little about how the bond pricing was going to go. And I came away feeling like I learned a lot about the whole process, and I want to learn more.\u201d<\/p>\n \u201cI really appreciate seeing the real-world application of what we\u2019re learning in class,\u201d said business administration major Christian King \u201923 of Dallas. \u201cI think through these case studies or through examples, it\u2019s a much better way to learn the information. I\u2019m really appreciative that Furman let us sit in on this, review this deal and see how it all comes about.\u201d<\/p>\n Besides getting an inside-the-ropes view on Furman\u2019s financing strategy, business administration major Jared Tuzon \u201923 of Charleston was impressed by the available career paths, which Raymond James and PFM representatives shared.<\/p>\n \u201cThis event showed how many occupations there are in public finance,\u201d he said. \u201cGoing into business, you really are focused on your major and not so much on employment at the beginning. And it’s interesting to see how many different career options there are in just this one major.\u201d<\/p>\n Addressing students via Zoom, Furman Trustee Kevin Byrne \u201991, CEO of The University Financing Foundation, closed the big day by thanking PFM and Raymond James representatives.<\/p>\n![\"white](\"https:\/\/news.furman.edu\/wp-content\/uploads\/2022\/01\/Elizabeth-Davis-on-bond-pricing-day-400.jpg\")
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