As Stocks Plummet, Affton Schools’ Bond Issue Thrives

A bad day for the stock market turned out to be good news for the today.

, an Affton School District bond issue did especially well Thursday as investors fled stocks for safer investments

“We couldn’t have had a better day to sell bonds, really,” said district Business Director John Brazeal. “There are a lot of things going on in the financial markets. For whatever reason, there is a lot of money moving out of the stock market into the bond market.”

With investors worried about a global economic slowdown and about an ongoing debt crisis in Europe, highly rated and well insured bonds like the Affton issue seemed like a safer bet than stocks this week. Demand for bonds exceeded supply Thursday, and interest rates for the Affton bonds were bid lower than expected by buyers.

Brazeal said these reduced interest rates will save the district $817,000 in expected debt service costs over the next 10 years.

“We picked this day for a reason, but we didn’t know it was going to be this good,” Brazeal said.

The school district’s bond issue, in planning for several months, involved refinancing roughly $8 million in debt the district took out in 2004 for capital improvements and operational expenses. The district issued approximately $12 million in bonds: $8 million to pay off the existing debt and an additional $4 million for the construction of the planned early childhood education center and for other facility improvements.

Because of generally lower interest rates on the new bonds, the district expected its annual debt service payments on its bonds to remain steady at $1.1 million. In fact, they will be lower.

The district will be paying $14.9 million over the next ten years in debt service costs. Originally they had expected to pay $15.7 million.

The district’s 2011 bonds have an S&P rating of A+. The district overall has a AA rating—very good for a district of this size. This was the first time the district has been rated.