University of Pittsburgh to Sell $525M

The University of Pittsburgh intends to sell roughly $525 million of Series 2017A taxable university refunding bonds on Jan. 5.

It's one of several higher education deals on the municipal primary-market calendar in the first week of 2017.

Wells Fargo Securities is lead manager. Moody's Investors Service rates the bonds Aa1, while S&P Global Ratings assigns a AA-plus rating. Both have stable outlooks.

"The university continues to be a stable center of education in western Pennsylvania, attracting both in and out-of-state students," said Eric Kazatsky, director of municipal credit research for Janney Capital Markets in Philadelphia. Credit positives, according to Kazatsky, include limited state support -- the school relies on the commonwealth for only 7% of its revenue – and its expansive University of Pittsburgh Medical Center.

In fiscal 2016, the university received nearly $250 million, or 11% of revenues from UPMC.

S&P in September revised its outlook on University of Pittsburgh Medical Center to stable from negative while affirming its A-plus long-term rating.

"The outlook revision reflects our view of UPMC's improved operating performance in fiscal 2016, which we expect will continue in 2017," said S&P analyst Cynthia Keller. "Although margins, debt-service coverage and some balance-sheet metrics remain thin for the rating level, we believe UPMC's extremely strong enterprise profile and stable balance sheet support the A-plus rating at this time."

The university has been pivotal to Pittsburgh's revival from a distressed industrial city to one with an economy centered around education and health care. Since the early 2000s, when the city flirted with bankruptcy and its bonds were rated junk, Pittsburgh has received numerous upgrades.

Mayor Bill Peduto expects the city to leave fiscal oversight by 2019. Pittsburgh has operated under two financial control boards: the Intergovernmental Cooperation Authority since 2004, and the state-run Act 47 workout program for distressed communities since 2003.

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