More Puerto Rico bonds are coming to market on Tuesday in a $78 million sale of higher education revenue debt and revenue refunding bonds.
The Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority, an instrumentality of the commonwealth, is issuing bonds for the Sistema Universitario Ana G. Méndez, the second-largest private university in Puerto Rico.
The proceeds will be loaned to the system to provide financing for the construction and improvement of university facilities, including a parking building, existing computer center facilities and a building for health sciences programs.
Proceeds will also refund $27 million of higher education revenue bonds, Series 1998, and all or a portion of $42 million of Series 1999 bonds.
Barclays Capital will price the bonds. The Government Development Bank for Puerto Rico is financial advisor and Squire Sanders LLP is bond counsel.
The bonds will be structured as serial and term and subject to redemption. They are limited obligations of the authority, payable from payments made by the university system.
The authority is a public corporation that provides financing for the acquisition, construction and equipping of industrial, tourist, educational, medical and environmental facilities.
According to the preliminary official statement, the authority had approximately $1.4 billion of revenue bonds and notes outstanding as of June 30, 2011.
Since the authority is a conduit issuer, it does not receive ratings. Instead, each issue is rated according to the borrower’s financial qualifications.
Standard & Poor’s assigned a BBB-minus to the bonds with a stable outlook, and affirmed the rating on the university system’s existing revenue debt. “The ratings reflect our opinion of [the university system’s] strong demand and recently stronger operating margins, which we believe continues to support the system’s extensive capital plan,” analysts wrote.
The rating report also cited the system’s low financial resources relative to the rating category and a heavy reliance on Pell Grants, which makes the system vulnerable to potential federal funding or eligibility changes.
The outlook reflects an expectation that enrollment will likely be stable and the system will likely maintain operating surpluses and financial resource ratios consistent with the rating category, Standard & Poor’s said.
Moody’s Investors Service and Fitch Ratings do not rate the bonds.
The university system is a private, not-for-profit corporation that owns and operates three universities in Puerto Rico, a newly established virtual university, and a non-commercial public television station. It was founded in 1949 to provide educational opportunities to students who could not otherwise obtain an education beyond high school.
