The Massachusetts Development Finance Agency plans a $54 million new-money sale of Northeastern University Series 2012 revenue bonds Thursday through negotiation.
Barclays is lead manager.
The school intends to reduce its debt with the proceeds. Moody’s Investors Service warned about the school’s debt in assigning an A2 rating and a stable outlook. According to Moody’s, Northeastern, whose main campus in Boston’s Back Bay neighborhood, has $740.3 million of pro-forma debt.
While praising Northeastern for its urban growth, diverse degree offerings, rising net tuition revenues and operational strength, the rating agency also warned about high debt and limited fundraising capabilities.
Operating cash flow provided 3.3 times average debt service coverage from fiscal 2009 to 2011, said Moody’s, which cited that as a strength. Northeastern in recent years has reduced it exposure to variable-rate, puttable debt in recent years, including conversion of Series T-1 and T-2 bonds, to fixed rate mode.
Moody’s, though, said heavy reliance on student charges is a challenge. Those charges, it said, represented almost 80% of operating revenue in fiscal 2011. Moody’s called Northeastern’s fundraising more limited than its peers, with three-year average annual gift revenue of about $30 million from fiscal 2009 to 2011, “although improving fundraising is a clear strategic priority with the planning of a comprehensive capital campaign.”
According to the preliminary official statement with the bond sale, Northeastern had 18,969 undergraduate students, including part-timers, and 10,948 graduate students.
Edwards Wildman Palmer LLP is bond counsel and counsel to Northeastern. Greenberg Traurig LLP is counsel to the underwriters.
MassDevelopment is the state’s finance and development agency. Last month, the conduit issuer received the Excellence in Bond Finance Award from the Council of Development Finance Agencies for its $14.5 million financing of the Worcester Polytechnic Institute Gateway Park research center.
