DALLAS - The Texas A&M University System on Thursday will offer the largest issue of higher education debt in the state so far this year with $350 million of revenue financing system bonds. But the system will wait to add another $250 million backed by the Permanent University Fund.
"We aren't under any time pressure to get the PUF deal done," said TAMUS treasurer Maria Robinson. "We do need to get the RFS bond deal done first."
With this deal, universities in the state will have issued more than $600 million in 2009. Texas Tech University System last week enjoyed an oversubscription of its $174 million of system revenue bonds. The University of Houston System issued $114 million last month.
Other collegiate issuers this year include Stephen F. Austin State University with $23 million and Texas Woman's University with $21 million, both in January.
Last year, the University of Texas System Board of Regents was the eighth-largest issuer in the state with about $1.1 billion of bonds. Total college and university debt came to $2.2 billion in 2008, a 203% increase over the 2007 issuance.
The A&M System revenue bonds carry ratings of AA-plus from Fitch Ratings and Aa1 from Moody's Investors Service. Standard & Poor's had not affirmed its outstanding AA-plus rating as of yesterday afternoon.
The A&M bonds are negotiated through JPMorgan and Morgan Keegan & Co. as senior managers with 12 co-managers.
First Southwest Co. serves as financial adviser. Series A bonds are expected to total about $271 million, while Series B amounts to $79 million. About $284 million will be used for improvements on campuses throughout the system.
McCall, Parkhurst & Horton is bond counsel for TAMUS.
The bonds will mature annually from 2010 through 2029.
Proceeds will also refinance about $64 million of outstanding commercial paper notes.
For the fall 2008 semester, the A&M system enrolled 109,441 students. Over the past five fall semesters, head-count enrollment has increased at an average annual growth rate of 1.5%.
The A&M revenue financing system was designed so that lending for all of the campuses in the system could be done under one program. The bonds are backed by all system revenues excluding state operating appropriations, constitutionally appropriated higher education fund payments, and available university fund monies pledged to the repayment of Permanent University Fund bonds and notes.
Last year, the A&M System issued $169.5 million of revenue financing system bonds, bringing the total outstanding to $700 million.
Financial market turbulence has lowered the value of TAMUS' investment portfolio, which holds the majority of its operating funds and longer-term financial assets.
Through the four-month period ended Dec. 31, the cash concentration pool fell nearly 14% to $1.3 billion, while the endowment fund declined 22% to $572.8 million.
"Fitch notes that this level of investment performance is consistent with other universities having a portfolio of a similar size and asset composition largely weighted toward traditional equities," analysts noted. "In general, TAMUS has been somewhat less aggressive than other institutions in its allocation toward less liquid alternative asset classes (22% of total investments) and is thus less exposed to the potential liquidity and valuation issues which accompany these instruments."
