The University of Connecticut intends to sell $335 million in Series 2017A general obligation bonds on Wednesday to fund capital projects that include the relocation of its Greater Hartford campus to downtown Hartford.
A two-day retail order period will begin Monday.
The institutional sale will include a $35 million refunding. The university issues the bonds in conjunction with the state treasurer's office, which pays the debt service on the bonds.
Piper Jaffray is senior underwriter.
Proceeds will fund the continuation of the Next Generation Connecticut capital program, the state's 10-year, $2 billion program of investment in the flagship public university that the state authorized in 2013. The program renovates and builds new classrooms, laboratories and infrastructure at its main campus in Storrs and its regional campuses.
"The program renovates and builds new classrooms, laboratories and infrastructure at Storrs and regional campuses," said John Sullivan, the school's treasurer.
Roughly $90 million of the proceeds will help backstop UConn's $140 million relocation of its Greater Hartford campus from suburban West Hartford to the former Hartford Times building at Prospect and Front streets downtown, behind City Hall and across from the Wadsworth Atheneum Museum of Art.
The new facility, which the school plans to open next fall, will be home to 2,300 students and 250 faculty members.
Other projects will include the completion of the $95 million engineering and sciences building in Storrs, expected by July; a 700-bed residence hall, which opened in the fall and is designed for science and technology students; a $180 million renovation of the Gant Science Complex; the renovation and addition of the fine arts center; and infrastructure and energy-efficiency projects throughout the system.
UConn's other campuses are the maritime studies center at Avery Point, Groton; downtown Stamford; Waterbury; and UConn Health in Farmington.
Fitch Ratings assigns an A-plus rating and stable outlook to the bonds. Moody's Investors Service rates them Aa3 with a negative outlook. S&P Global Ratings assigns AA-minus and negative.
On Dec. 19, S&P revised its outlook to negative from stable and while affirming AA-minus on UConn's $79.9 million Series 2012A and $32.5 million 2010A student fee revenue and refunding bonds, and $1.3 billion of 2000 GO debt service commitment bonds.
The change "reflects our view that UConn's financial performance and available resources are weak for the current rating and that unfavorable state budget conditions are placing further strain on the university's finances," said S&P credit analyst Ken Rodgers.
According to Sullivan, S&P was mirroring its previous action on Connecticut general obligation bonds by moving UConn to a negative outlook.
"That said, these UConn bonds are different than the state credit in that they offer the double-barrel security of the state's debt service commitment plus the university's general obligation," he said.
Bond rating agencies pummeled Connecticut with three GO downgrades in 2016, citing the state's budget imbalance. Additionally, S&P on Nov. 30 lowered its outlook on Connecticut GOs from negative to stable. State officials project a deficit of up to $1.4 billion for fiscal 2018.
Connecticut is on track to end fiscal 2017 with a $56.2 million deficit, state Comptroller Kevin Lembo said Tuesday. Lembo said his
The gap could reach $1.3 billion by fiscal 2018, which begins July 1.
Capital city Hartford is battling its own fiscal demons. Mayor Luke Bronin intends to ask the state legislature again to consider regional taxes and other remedies for distressed cities. Hartford projects a $23 million gap this fiscal year and more than $50 million in the next.
Bronin has been pitching the suburbs on his "regional solution." On Tuesday he spoke in high-end Simsbury.
In a recent Bond Buyer podcast, Bronin said UConn could help fuel an economic development boom downtown.
"There are a number of things that are going on here that are exactly what you want to see happen to spark an urban revitalization," he said.
"The University of Connecticut [is] hugely important. You have thousands of students coming into downtown revitalizing a long vacant, iconic Hartford Times building. It physically connects our Main Street area down to our Front Street area, which has been the site of a lot of redevelopment lately and has now finally emerged as a successful entertainment and food center.
"That's going to make a big difference in the vitality of the city."
UConn broke ground for the building in May 2015. The 95-year-old beaux-arts building has remained vacant – and a political football -- since 1976 when the Hartford Times newspaper closed. UConn intends to add an attached five-story building while retaining the iconic Beaux-Arts facade of the 95-year-old structure. In addition, UConn purchased an adjacent building on Prospect Street.
The university also intends to share collection space with the nearby Hartford Public Library.
The move also returns UConn to its roots in Hartford, where it had existed from 1939 until 1970. The Town of West Hartford, meanwhile, purchased the vacated parcel at Asylum Avenue and Trout Brook Drive for $5 million. The town had the right of first refusal.
Malloy has said UConn could propel Hartford's turnaround the way its Fairfield County campus did in Stamford when Malloy was mayor of that city from 1996 to 2010.
Over the last two decades, the state has prioritized infrastructure at the state's flagship public university. UConn GO bonds have been issued as part of the UConn 2000 program, enacted in 1995 and extended five times, through 2024.
Tech-related initiatives have included the arrival of the Jackson Laboratory genomic medicine institute at the UConn Health Center in Farmington and the construction of a tech park on the flagship Storrs campus for public-private partnerships, primarily in the science, technology, engineering and math fields.
Under the most recent extension, according to Fitch, the program's total estimated cost has risen to $4.6 billion over the 1995-2024 period, of which $4.3 billion will be UConn GO bonds benefitting from the state's debt service commitment.
Of this amount, said Fitch, almost $2.4 billion in debt service commitment bonds have been issued for university capital projects to date, with almost $1.3 billion now outstanding.
Pullman & Comley LLC is bond counsel for the sale. The Law Offices of Joseph C. Reid PA is co-bond counsel. Updike, Kelly & Spellacy PC and Lewis & Munday PC are representing the underwriters. Day Pitney LLP is disclosure counsel for the state.
First Southwest is the municipal advisor.
