BRADENTON, Fla. — Appalachian State University in northwestern North Carolina Tuesday will competitively sell $60.14 million of general revenue bonds.
Proceeds will finance capital improvements, including a new residence hall for 333 students and expansion of the student union.
The deal is structured with a 25-year amortization to achieve level debt service payments, according to the financial adviser Walter Goldsmith, a senior vice president with Davenport & Co. Hunton & Williams LLP is bond counsel.
Even though the deal has longer maturities, Goldsmith said it should be well received.
“The rally in the municipal market over the last month and the reduced supply of other high-quality paper should benefit ASU,” he said. “Even though the rally hasn’t been as strong on the back end of the yield curve, rates are still down 30-55 basis points from the start of the year.”
The bonds are rated Aa3 with a stable outlook by Moody’s Investors Service.
ASU’s general revenue bonds are secured by unrestricted general and quasi-endowment fund balances, except tuition charges, state appropriations, donor-restricted funds, and revenue securing previous debt.
In fiscal 2010, funds available for debt service on general revenue bonds provided 10.45 times coverage, according to Moody’s analyst Eva Bogaty.
“The … Aa3 rating is based on the state of North Carolina’s historically strong financial support, the university’s market position as a growing public institution with undergraduate and graduate programs, and favorable operating performance,” Bogaty said. “Offsetting these factors are the risk of reduced state support and the university’s increasing debt burden resulting in highly leveraged operations and balance sheet.”
In fiscal 2010, Aaa-rated North Carolina provided 43.2% of ASU’s operating revenues, including $128 million of state appropriations and $9.4 million of state aid federal recovery funds, he said.
State appropriations for the current year are expected to decline by 6%, while the outlook for fiscal 2012 funding awaits legislative action. Lawmakers are currently discussing public education cuts around 5% and will be in session through early June.
Appalachian State University is in the town of Boone in the Blue Ridge Mountains. It has an enrollment of 17,222 students.
For this fall, ASU has received 13,150 applications for a freshman class that is expected to have 2,850 students. The school maintains small classes with an average of 25 students, and a student-faculty ratio of 16 to one.
The University of North Carolina system sold about $20 million of pool revenue bonds for ASU last year.
