The Mount Sinai School of Medicine at New York University is going to market next week with $369.6 million of tax-exempt bonds. The Dormitory Authority of the State of New York will offer the fixed-rate bonds to retail investors on Tuesday and to institutional investors on Wednesday.
The school, which is located on Manhattan’s Upper East Side of, plans to use the proceeds to construct and equip an 11-story building called the Center for Science and Medicine and a 10-story building to support the center and other school facilities. The bond proceeds will also be used for additions to a power plant that serves the school and Mount Sinai Hospital, with which the school is affiliated.
The bonds will be sold as serials maturing from 2017 through 2024 and as terms with maturities in 2029, 2034 and 2039.
JPMorgan is book-running senior manager on the deal. Orrick, Herrington & Sutcliffe LLP is bond counsel. The capital construction is part of a 10-year strategic plan that began in 2006 to attract and retain top-notch biomedical research faculty. The school has $318 million of long-term debt outstanding, all of which is fixed-rate and not subject to any swaps. It last sold bonds through DASNY in 2007, with a $120.8 million deal.
The school provides health care services and conducts research, activities which generate more revenue than the tuition. Enrollment at the school, which grants M.D., Ph.D. and Masters degrees, is up this year with 533 students compared to 516 last year, according to the preliminary official statement. The school has been academically affiliated with New York University since 1999 but it is financially autonomous and in the process of dissolving the affiliation as it seeks accreditation to grant degrees on its own.
Last year the school had revenues of $1.03 billion which included $402.6 million from patient care, $253.3 million from federal grants and contracts, and $20.4 million from tuition and fees, according to the POS. The school had a $105.7 million deficit last year, primarily due to a hit on lon- term investment revenue.
Gifts and grants to the school may decline this year compared to last. The school has received gifts or pledges of $67.4 million in 2009 to date, compared to $112.2 million in 2008, according to the POS. However, its endowment is doing better this year, increasing in value to $526.9 million from $478 million at the end of last year.
Standard & Poor’s rates the bonds A-minus, citing a manageable debt burden, a history of improving financial performance, a good level of financial resources and satisfactory liquidity, solid demand for the school’s academic programs, and increasing federally sponsored research.
The rating agency this month revised downward the school’s outlook to stable from positive.
“That reflected the increase in debt relative to what we expected,” said analyst Mary Peloquin-Dodd. “The other thing is just to reflect a more challenging business environment ... Their balance sheet certainly took the same kind of hit that we’ve seen across a lot of endowments.”
Moody’s Investors Service rates the bonds A3 with a stable outlook.