DALLAS — The University of Colorado Board of Regents will have $1.4 billion of outstanding debt after this week’s $203 million enterprise revenue bond issue, according to analysts.
The university system achieved a true interest cost of 4.146% on the Series A bonds with serial maturities through 2041, said treasurer Don Eldhart.
The bonds had ratings of Aa2 from Moody’s Investors Service and AA-plus from Fitch Ratings, both with stable outlooks.
The bonds priced through negotiation Tuesday with Stifel, Nicolaus & Co. as book-runner. RBC Capital Markets and Loop Capital Markets were co-managers.
Proceeds from the bonds will finance capital improvements at the Boulder and Colorado Springs campuses and cover issuance costs.
The regents had planned to issue $42 million of Series B refunding bonds, but the escrows were prohibitively expensive, Eldhart said.
Projects at CU Boulder include renovation and construction of its heating and cooling complex, expansion of the current student recreation center, and expansion and renovation of residential facilities in the Kittredge Complex.
The projects at CU Colorado Springs include expansion of its residence halls to accommodate an additional 216 beds and the first phase of construction of an academic health sciences center.
Despite its diverse array of academic offerings and well-regarded research programs, the University of Colorado, like other large public university systems, faces severe economic challenges as the Colorado legislature seeks ways to cut spending.
Moody’s analyst Erin V. Ortiz noted that the state funding problems come during a period of CU’s growing debt relative to expendable financial resources.
“Pro-forma debt has grown 59% from fiscal year 2007, with FY 2010 expendable financial resources covering pro-forma debt, including the Series 2011 bonds, 1.0 times,” Ortiz said in the rating report.
Due to Colorado’s ongoing revenue shortfall, state support to CU has fallen about $72 million since fiscal 2009.
“While this represents a limited portion of the university’s operating budget, management took steps to offset this loss in funding, including raising tuition and fees and reducing and-or eliminating various administrative costs,” noted Fitch analyst Colin Walsh.
Despite the funding pressures, respected public universities like CU are expected to weather the economic weakness better than other sectors due to growing demand for higher education and varied revenue sources.
“The recent recession created a proving ground of sorts for colleges and universities, with many institutions demonstrating surprising resilience,” Standard & Poor’s said in a June report on the sector. “However, this is reflected in the average credit rating on public colleges and universities remaining unchanged at A-plus with a stable outlook.”
