The National Academy of Sciences on Thursday aims to sell $57.5 million of variable-rate revenue debt to refund 1999 bonds. The deal is rated triple-A by Moody’s Investors Service and Standard & Poor’s based on a letter of credit from Bank of America.
The debt will be issued as commercial paper through the District of Columbia. Banc of America Securities LLC is the underwriter, Venable LLP is bond counsel. Prager, Sealy & Co. is financial adviser.
Moody’s assigns a Aa3 underlying rating to the academy with a negative outlook, citing risks associated with $66.3 million of bonds it sold in 2008. Those also are variable rate and backed by an LOC from Bank of America.
Under the terms of the 2009 LOC, the academy is required to keep a debt service ratio of 1.10. The ratio was 1.96 at the end of 2008. The academy must maintain an underlying rating of A3 or higher. The LOC expires in June 2011.
The academy has two interest rate swaps with Bank of America. As of April 3, their combined value was negative $12.4 million for the academy, which is not currently required to post collateral, Moody’s said.
The academy is an honorific society of scholars engaged in scientific and engineering research. A private corporation created in 1863, it has about 6,000 members and relies on federal contracts for 84% of its revenue. Contract revenue increased 12% in 2008, but had been flat since 2002. The academy’s investment portfolio fell 31.4% in 2008 and that could affect its credit rating, Moody’s said.
The academy is considering selling $60 million of bonds over the next two years.