The Ohio Higher Educational Facility Commission will issue $105 million of tax-exempt revenue bonds next week on behalf of Case Western Reserve University to refund all of its outstanding commercial paper and variable rate direct purchase debt.

The bonds will refund $30 million of outstanding commercial paper and close the university’s commercial paper program. The university has no current plans to start a new CP program. Bond proceeds will also refund the outstanding $72 million, Series 2015B private placement.

Adelbert Hall at Case Western Reserve University in Cleveland, Ohio.
Case Western Reserve University will retire all of its commercial paper and variable rate direct purchase debt with bond proceeds. Case Western Reserve U.

Post-issuance, CWRU will have approximately $506.1 million of outstanding debt, the majority of which is fixed rate and amortizing. The university does have several medium-term bullets which it plans to refinance at maturity.

The bonds are secured by an unconditional guarantee by the university for the payment of the bond service charges.

Morgan Stanley is the senior manager with Drexel Hamilton, Huntington Capital Markets, JP Morgan and PNC Capital as co-seniors.

Moody’s Investors Service assigned an A1 rating with a stable outlook to the upcoming issue, and affirmed its A1 rating on the university’s outstanding debt. S&P Global Ratings assigned its AA-minus rating to the upcoming issue and affirmed its AA-minus underlying rating on the outstanding debt. The outlook is stable.

“CWRU's strategic positioning is very good, anchored by a market position that will continue to strengthen as it expands partnerships and leverages a prominent graduate reputation to bolster its research and academic profile nationally,” Moody’s stated in a report.

The Cleveland-based university is the state’s largest independent research university. Enrollment is up by more than 13% since fiscal 2013. For its 2018-19 school year, the university reached a 50-year peak enrollment of 10,917 full time students. “This growth occurred while many other institutions, particularly in the Midwest, suffered declines,” Moody’s said.

CWRU maintains education and research affiliations with University Hospitals Health System, Inc., Cleveland Clinic, the MetroHealth System and Louis Stokes Cleveland VA Medical Center.

It had over $1.7 billion of total cash and investments at the end of fiscal 2017. The university's three-year average gift revenue – from fiscal 2015 through fiscal 2017 -- is approximately $105 million, significantly above similarly rated peers, according to Moody’s.

“CWRU's financial leverage will remain manageable given an amortizing debt structure and no near-term plans to increase debt,” Moody’s said. “The university's debt has favorably decreased by 15% since fiscal 2013, down to $507 million in fiscal 2017 from $595 million in fiscal 2013.”

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