Baylor University is coming to market with $124 million of tax-exempt revenue bonds and a positive outlook on its A-plus credit from Fitch Ratings.
“The outlook revision to positive is supported by an expectation that Baylor will continue adding to its already healthy liquidity, via solid cash-flow trends and better-than-budgeted fiscal 2021 results, strong endowment performance, and an improving outlook on enrollment and net tuition trends through 2021 and into 2022,” Fitch analyst and senior director Emily Wadhwani said.
Despite the pandemic, Baylor’s graduate student base grew 22% in fall 2020. Graduate students make up about a quarter of enrollment, so growth has cushioned against flatter undergraduate enrollment, Wadhwani said.
S&P Global Ratings also rates the bonds A-plus with a stable outlook.
The bonds are scheduled to price Thursday through negotiation with book runner Morgan Stanley & Co. LLC. The Yuba Group is financial advisor.
The Waco City Council approved the bond issuance through its Waco Education Finance Corporation on June 15.
Proceeds of the sale will be used for projects on the main Waco campus, including a visitor’s center and improvements in residential buildings.
Chartered by the Republic of Texas on Feb. 1, 1845, Baylor is the oldest continuously operating college or university in the state. It is the largest Baptist university in the world.
The university is known in Dallas and Houston for its medical schools and hospitals. The Waco campus is also home to its law school.
Out of the university’s enrollment of 19,297 in fall 2020, about 75% were undergraduate students. After a shift to fully virtual classes in March 2020 at the outset of the pandemic, the fall semester was shortened to eliminate the fall break, and building densities were reduced.
Baylor has been awarded $54.1 million of stimulus funding, including $5.4 million of CARES Act institutional use, $10 million of CRRSA institutional use, and $13.8 million of ARPA institutional use, per Fitch.
“Student quality remains strong, including retention above 90% and a six-year graduation rate approaching 80%,” Wadhwani wrote. “Good expense management has supported steady cash-flow margins near 13% on average over a three-year period, which are expected to persist going forward.” Baylor has about $583 million of outstanding debt, according to its roadshow presentation on the upcoming sale.
The showpiece project to be funded with the bond proceeds is the $75 million Mark and Paula Hurd Welcome Center that broke ground in February. The Welcome Center will feature a 120,000-square-foot complex designed as a hub for about 60,000 prospective students, families, alumni and other guests at the Waco campus.
The project, under the supervision of the architectural firm Populous, is expected to be completed in May 2023.
In May, the Baylor University Board of Regents also approved resuming the master plan for campus residence hall renovations, including plans for a $38.5 million renovation of Collins Hall and a $35 million renovation of Memorial and Alexander Halls.
