Texas A&M Readies $173 Million For Various Campus Improvements

DALLAS — The Texas A&M University System expects to open 2008 with a $173 million revenue bond offering for a series of improvements to satellite campuses throughout the state.

If market conditions permit, the system will price the bonds competitively on Thursday.

“We feel pretty confident that we will be able to do the deal on Jan. 10, and we feel we’ll get a pretty good pricing,” said Greg Anderson, associate vice chancellor and treasurer for the A&M system. “We’re looking forward to a lot of bidders.”

A decision on whether to go forward with the pricing will be made tomorrow, according to Mary Williams, senior vice president for financial adviser First Southwest Co.

“We just have to give 12 hours advance warning,” she said. “But we have a six-month pricing window that runs from now through June.”

Anderson said that it is not unusual for the university to market bonds competitively.

“When we have a refunding, we typically go to a negotiated sale,” he said.

The new debt will be used to take out about $130 million of commercial paper, leaving about $40 million outstanding, according to the official statement.

The bonds are part of A&M’s revenue financing system, offered as serials maturing from 2008 to 2037. The RFS was created to issue debt for the university’s satellite campuses under a single program to improve efficiency. The campuses that will use the bond proceeds are not eligible for backing by the state’s Permanent University Fund.

Because the system revenue bonds do not carry the PUF guarantee, they do not qualify for the triple-A ratings that go with it. The bonds issued this week carry ratings of AA-plus from Standard & Poor’s and Fitch Ratings, and Aa1 from Moody’s Investors Service.

The bonds will not be insured, Anderson said. The issue is expected to attract institutional investors, along with some retail. The bonds are tax-exempt. Texas has no income tax.

McCall Parkhurst & Horton of Dallas serves as bond counsel.

The Thursday deal is Texas A&M’s first in about a year. The university has authorization to issue $465 million of tuition revenue bonds under the PUF program, but is not expected to issue any of that in the first half of the year.

“We are doing a significant amount of expansion that will entail a significant amount of debt,” said Maria Robinson, director of treasury services for the A&M system. If all of the authorized debt is issued, it would double the amount of PUF debt the university has outstanding, she said.

When the 2008A bonds are issued, total system debt will be approximately $1.41 billion, of which slightly more than $1 billion is revenue finance system bonds or notes.

“Future debt plans are manageable, with an estimated $300 million of new RFS debt anticipated in the next year and an additional $500 million within the next five to seven years,” noted Standard & Poor’s analysts Jessica Matsumori and Mary Peloquin-Dodd.

The master resolution for the revenue financing system debt pledges unrestricted current fund revenues, including tuition and fees, sales and service revenue, gifts, unrestricted appropriations, and investment income. Pledged revenues for fiscal 2007 were about $1.8 billion, “a level that provides substantial coverage,” the analysts observed.

The system’s enrollment exceeds 104,500 students, including about 23,000 graduate and professional students. The flagship College Station campus has about 46,500 students and is the state’s designated land grant institution. Texas A&M is known for its engineering, veterinary medicine, business, dental, and medical professional programs. For fall 2007, the A&M system accepted about 73% of its freshman applicants, and a solid 53% of those students graduated.

Among the projects to be funded with the proceeds of the 2008 issue are a $24.3 million nursing center for Tarleton State University at Stephenville. The campus will also get a $13 million dining hall, a $15 million recreational sports facility, and an $11.1 million dairy center.

The Prairie View A&M campus in Waller County near Houston will get $3.8 million for repairs to the John B. Coleman Library.

The Kingsville campus in South Texas will get a $12 million recreational sports center and a $4 million renovation to the Citrus Center Building.

The Corpus Christi campus will get a $21.8 million Wellness Center, and West Texas A&M in Canyon will get $12.8 million for new residential housing and $16.2 million for classroom renovations.

The new Texas A&M Texarkana campus on the Texas-Arkansas border is building a $20.6 million science and technology building.

At Texas A&M Commerce, formerly East Texas State University, a new $25.4 million student center is in the works. The campus also plans to add a $29.6 million music building in 2009.

Also in 2009, the Galveston campus, home to A&M’s oceanography program, is planning to build a $50 million science building.

One of the most significant events for Texas A&M in 2009 will be the opening of the new San Antonio campus. When construction is complete, the new campus expects to enroll 1,500 students, with a goal of 25,000 students. The new university, currently under the name Texas A&M University-Kingsville System Center, is part of a plan from the Texas Higher Education Coordinating Board to enroll 630,000 students in college by 2015.

The Texas Legislature approved the creation of Texas A&M University-San Antonio in 2003 and earlier this year authorized $40 million of tuition revenue bonds for development of the new campus.

“This new campus will bring quality higher education to an area that has been neglected for far too long,” said Lowry Mays, a Texas A&M regent and chairman of the board of Clear Channel Communications in San Antonio. “Texas A&M-San Antonio will be central to the A&M System’s mission of providing access to all qualified students and to the state’s goal of increasing Hispanic enrollment in Texas colleges and universities.”

In the last fiscal year, the A&M system began $248 million of projects with tuition revenue bonds and $321 million using PUF bonds. In the current fiscal year, the A&M Board of Regents expects to launch projects using $207 million of tuition revenue bonds and $90 million using PUF bonds, according to the official statement for the upcoming issue.

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