Charlotte Latin Schools, Inc. Case Study

Charlotte Latin Schools, Inc.

Charlotte Latin School is an independent, co-educational, not-for-profit day school located in Charlotte, North Carolina, enrolling students in transitional kindergarten through twelfth grade. Latin was founded in 1971 and serves approximately 1,500 students on its beautiful 132-acre campus. Latin is widely known in the marketplace for its nurturing setting and its academic rigor. Latin boasts thriving co-curricular activities with 67 athletic teams and extensive arts disciplines. The School also operates one of the top 25 ‘fabrication laboratories’ (Fab Lab) among all independent schools and colleges in the nation.

The Opportunity

$27,000,000
Current Refunding / Interest Rate Mode Change

Amid a transformative capital campaign in 2017, SouthState was selected to provide a loan to the School to fund certain capital improvements on campus and currently refund the School’s outstanding debt. Taking advantage of the shape of the yield curve, the Bank was able to provide to provide Latin 15-year, on-balance sheet, fixed-rate financing.

While the blended rate of the 2017 loans was highly attractive, the rate environment was falling in late 2021. Interestingly, the interest rate swap market fell faster and farther than the bank fixed market could tolerate and SouthState recognized a savings opportunity for its client.

The Solution

SouthState leveraged its product offerings to design a financing solution for Latin that enabled this exciting opportunity:

Re-engineer Outstanding Loans. By altering the documentation to add an additional rate mode, not a reissuance, the School could elect a new variable rate (SOFR) and then enter into an interest rate swap to fix the rate through the end of the Bank commitment term.
Education. SouthState helped educate the School on the risks being assumed through a synthetically solution. Since Latin had done extensive research to establish its ‘core debt’ through its prior borrowing and capital campaign, the financial objective here was simply to generate savings.
Execution. Working closely with Latin and its advisor, SouthState coordinated the rate mode addition and the swap to happen on the same day; this minimized risk and led to the School locking in a swap rate that was historically favorable.
Savings. Ultimately, the solution provided by SouthState will generate approximately $300k in annual savings to Latin over the next 12 years.

Charlotte Latin Schools, Inc. Case Study