East High students witness live sale of bonds, tour Chicago Board Options Exchange

On Feb. 12, East Aurora High School students got the rare opportunity to witness live the sale of bonds from the company headquarters of Loop Capital in Chicago.

The global investment services firm invited the high school students to their 19th floor offices at 111 W. Jackson to offer a real-life education on the sale of bonds, as well as the thrill of watching the live sale of the school district's bonds.

East High seniors Michael Martinez, Tim Gehler and Jenessa Davis, along with junior Jasmine Alcala and sophomore Lorena Alvarez, joined East Aurora Unit District Superintendent Dr. Jennifer Norrell and Chief Financial Officer Dr. Ann C. Williams for the experience.

Each of the students was chosen for their leadership role held at East High.

The bond sale took place following the East Aurora Unit District 131 board of education's passage of two resolutions last month for the issuance of bonds. The first was for the issuance of up to $23.7 million as part of the district's debt refunding and restructuring plan for savings, and to also level out the tax levies for the bonds.

The second bond issuance was for $35 million of alternate revenue bonds to fund heating and air conditioning improvements at seven schools beginning this summer, as well as other capital projects.

The bond sale will help the district fulfill its commitment to improving the student learning environment by providing heating and central air conditioning in all district schools, with the first seven schools being slated for work this summer. The bond issue allows the district to preserve their general fund and avoid a tax increase.

In a large conference room at Loop Capital, Clarence Bourne, managing director of Loop Capital's investment banking division, walked the students through an educational session called "Bonds 101"- giving students an overview of the various types of bond sales, the stages of the bond sale process, fees and requirements involved, and how bonds are sold and negotiated.

Paula Arnedo, an analyst from Raymond James, represented the district and attended the sale. The Chicago resident described her role as providing fiduciary responsibility in making sure that the transaction is priced correctly and assuring the district receives maximum benefit in the bond sale.

Bourne explained to the students that District 131 held an excellent financial rating of A1, which would allow the district's bonds to get a very low interest rate, which in turn, gives the district a better price.

During the session, Bourne shared with the students that he bond sale represented a financially prudent way to spread out the cost of a capital project over many years, at a very low rate of interest.

Dr. Norrell felt it was important to engage students in the experience, and provide young people with a front-row seat at the district's financial initiatives.

"We wanted to give students the opportunity to participate in the funding mechanisms responsible for bringing $52 million to district and making our initiatives possible," said Dr. Norrell. "All this while also being exposed to Wall Street finance and the Chicago Board of Exchange."

Dr. Norrell considered the students' involvement an excellent way for them to understand the financial recognition their Board of Education has provided for the school district. "I think that our students each walked away from the experience feeling proud of our district and its financial ratings, and what that means across the country."

In the conference room, the students viewed a large projection screen displaying the sale taking place live on a website. Students watched the order period, tracked live, as institutional and retail investors bought orders. As more orders came in for the bonds, it allowed the district to secure better pricing. In the end, the $52 million deal was filled 8.4 times.

East High senior Tim Gehler was grateful for the opportunity the visit. Gehler, who this year serves as the regimental commanding officer for the Tomcat NJROTC, is hoping to transition into politics after the military.

"The behind-the-scenes look really spiked my interest," said Gehler. "I want to someday transition from military into public service, and seeing how municipal bonds work would be very helpful to me in the future."

Gehler said his highlight of the day was watching the numbers rise to meet the order 8.4 times, and seeing the district's interest rates drop.

In the corner of the projection screen was a smaller video conference feed from New York, where Bill Evans, senior vice president of municipal underwriting at Loop Capital explained the details of investors who were involved. Evans reviewed the sale and said the activity was "snowballing into a very nice order book."

Jim Reynolds Jr., chairman and chief executive officer at Loop Capital, soon entered the room and warmly welcomed the students from East High. Reynolds said he was pleased with the results of the sale.

"When you look at the book and the quality of some of the most distinguished investors in the municipal bond business looking at a transaction like this, it's amazing."

Reynolds praised the District 131 board leadership for the opportunities their financial position has afforded the district.

"When we had the chance to sit down with Ms. (Annette) Johnson, your board president, we really applauded her fiscal discipline here. You're one of the highest rated entities in the state of Illinois - in a state that has been under significant fiscal stress, and your district stands out like a cool lake in the middle of the desert. And the buyers recognize that."

Reynolds told the students more about the firm, including their 20-year-old internship program, and how their current president, Kourtney Gibson, began as an intern during her sophomore year in high school, and stuck with it. "Now she's our president, and on CNBC all the time," he said.

Over lunch, Reynolds engaged with the students further - asking about their families, background, and post-graduation plans, and sharing the story of his career.

As a high school student, Reynolds said he wasn't even aware of finance as a profession, but later as a young person, he came to know the process of money making money - through investment, and was hooked.

He also voiced his firm's commitment to putting more women and minorities into their internship program, as well on Wall Street.

Reynolds said that for many interns, their association with Loop Capital began with the idea of eventually pursuing another type of career, but once they were exposed to the finance business, they often change their minds and want to pursue a career in finance.

"It's a great profession. When you think about what happens in a finance or investment firm, when you think about economic freedom, it's not all about money, but the ability to change your life, your parents' lives, your family's lives, and invest in the community around you ... it's an amazing opportunity to do all sorts of things."

Michael Martinez, 17, senior and student board member for District 131, was present at the January board meeting when the bonds were presented to the board.

Martinez said that while he currently is exploring mechanical engineering at University of Illinois, the day's experience was making him rethink some of this choices.

Jasmine Alcala, 17, and Lorena Alvarez, 15, are both leaders of the East High business club DECA. They manage a student-led business at their school called "Paw Place" - a store inside the school that sells Tomcat apparel.

Alvarez, who serves as the DECA club president-elect, said the experience was a whole different world than what she is used to seeing each day.

"When I think about our district and finances, I really don't think about the specifics of it, so it was really interesting to see how bonds are exchanged," she said. "The day really made an impact on me as an aspect of the real-life business world."

Alvarez was also impressed with Reynolds. "When you think of a chief executive officer, you would think he would be intimidating, but he was really nice, a charismatic guy, and he was really interested in our stories, our background."

Alvarez said the experience had a direct connection to her work in the East High business club.

"In DECA, we talk a lot about professionalism and how it will help you in the real world. In our competitions, we do role playing and put ourselves in the position of being a real business executive. When you see someone who actually has that title, it helps you relate to that."

After lunch but before heading home, the students, Norrell and Williams joined Bourne and Arnedo for a tour of Chicago Board Options Exchange. Students received an up-close view of the trade floor, and learned about the history of the CBOE as well as the action taking place that day. The group took a photo by the iconic bell, which is rung to signal the opening and closing of the day's trading.

East High senior Jenessa Davis, 17, who has thought about working in marketing and eventually start her own business, said the experience helped her think more about how she can incorporate finance in her future.

"I have been thinking about entrepreneurship, and I feel like my mind is not as close to numbers as it is creative, but I want to find a way to blend the two," said Davis. "Coming here made me more open to the numbers side."

Norrell appreciated the accommodations CEO Jim Reynolds and the entire Loop Capital team provided to the high school students, and pointed out that not only did they save the district over $600,000 in municipal bond interest, but they welcomed high school students into the process, and shared with them an upfront view of the financial world.

"It was really gratifying to see how Loop Capital approached the experience for our district. They demonstrated care for not only the district financially, but for our most precious assets - our children. They went out of their way to turn a financial transaction into an extraordinary educational opportunity and exposure for our students."