DALLAS – After rapid growth in leverage over the past five years, the Colorado State University System will have $631 million of outstanding when it sells $125.8 million of enterprise revenue bonds this week, analysts said.
The system, based in Fort Collins, is issuing system enterprise revenue bonds in a negotiated deal with RBC Capital Markets and Morgan Stanley.
North Slope Capital Advisors is financial advisor. Kutak Rock is bond counsel.
The serial bonds reach final maturity in 2044, with call dates to be announced.
Because of guarantees from Colorado’s State Higher Education Revenue Bond Intercept Program, the bonds carry enhanced ratings of AA-minus from Standard & Poor’s and Aa2 from Moody’s Investors Service. The underlying ratings are A-plus and Aa3, respectively. Outlooks are stable. Fitch Ratings does not rate the issue.
“The system’s Aa3 underlying rating and stable outlook reflect the system’s large and diversified enrollment base, improved operating performance and operational flexibility, research growth, and legally pledged revenues providing sufficient debt service coverage,” wrote Moody’s analyst Mary Cooney. “These credit strengths are offset by the system’s rapid increase in leverage over the last five years and cuts in state operating and capital support.”
The bonds will be used to build classroom and residential facilities at the flagship campus in northern Colorado and to buy the University Village at Walking Stick student housing facility at the CSU-Pueblo campus in the southern part of the state.
In 2010, Colorado passed a bill allowing public institutions to raise tuition without legislative caps, up to 9% or more annually through July 2016, when the bill expires. CSUS’ submitted and approved plan allows it to increase tuition up to 12% annually.
The CSU system could issue another similarly sized debt issuance during the next two years for a parking garage, additional student housing, and renovations to the Pueblo campus student center, according to analysts.
“The stable outlook reflects that we anticipate continued balanced operating results on a cash basis, the maintenance of adequate levels of financial resources, and stable enrollment and demand measures during the next one to two years,” wrote Standard & Poor’s analyst Jessica Lukas. “Significant weakening of financial resource measures through the issuance of additional debt or deterioration of the balance sheet or operating deficits on a cash basis could result in a negative rating action during the next one to two years.”
