The University System of Maryland plans to bring $142.3 million of auxiliary facility and tuition revenue bonds to market in a competitive deal tomorrow.
USM plans to issue $90 million of Series 2008A bonds to finance a variety of capital projects and $52.3 million of Series 2008B refunding bonds to refund Series 1998A and 1999A bonds.
The debt is also secured by a consolidated bond fund and a construction fund. Public Financial Management Inc. is financial adviser on the deal. Abramoff, Neuberger and Linder LLP is bond counsel.
Ahead of the offering, Standard & Poor’s upgraded USM’s outstanding debt and the Series 2008 bonds to AA-plus from AA, both with a stable outlook, to reflect “the system’s consistently strong operating performance, solid demand, and history of good operating and capital support from the state of Maryland.”
Moody’s Investors Service rates the deal Aa2 and Fitch Ratings assigns a AA, both with stable outlooks.
The system is made up of 11 of Maryland’s 13 public higher education institutions — including the University of Maryland, Towson University, and Bowie State University — and two major research components.
Standard & Poor’s said the upgrade also reflects the system’s potential to raise funds, “given good progress on the current capital campaign, with a recently increased goal of $1.8 billion.”
USM’s revenue sources are diverse, with net tuition contributing 25% of fiscal 2007 revenues, state operating appropriations contributing 27%, and grants and contracts contributing 23%. State appropriations increased to $933 million in fiscal 2007, a $122 million jump from the previous year, and increased 6.8% in fiscal 2008 to $997 million. USM management expects state funding for capital projects to be more than $1.3 billion, or $260 million per year for the next five years.
The system last issued auxiliary facility and tuition revenue bonds in 2002, when it sold $144.6 million of Series 2002A bonds to Salomon Smith Barney, now Citi, at 4.521% true interest cost.
