CHICAGO – DePaul University in Chicago will sell $70 million of bonds Tuesday primarily to finance a new music building.
The Illinois Finance Authority is conduit issuer with Goldman Sachs as senior manager and Samuel A. Ramirez & Co. Inc. and RBC Capital Markets LLC as co-managers.
Ahead of the sale, Fitch Ratings and Standard & Poor’s affirmed the school’s A rating and Moody’s Investors Service affirmed its A2. All assign a stable outlook.
The school has about $260 million of existing debt.
DePaul will use proceeds for the new music building on its Lincoln Park campus, ongoing renovations to its John T. Richardson Library, and improvements to the school’s downtown campus. The music building carries a price tag of $100 million and will open in 2018 offering a concert hall for public performances, smaller recital halls, and underground parking.
DePaul has an enrollment of more than 20,000 making it the largest Catholic university in the country, with about $600 million in annual revenues.
Moody’s said its rating reflects “DePaul University's consistently strong unrestricted liquidity, solid student demand as a large Chicago private university, moderate leverage with rapid debt repayment, and ample debt service coverage from good operating cash flow.”
The rating also incorporates DePaul’s expected use of its liquid reserves to finance its share of a multi-event center to be owned by another organization. The university is also relying on its liquid reserves to fund the state's Monetary Award Program need-based grants due to the state’s budget impasse.
“If the state fails to pass legislation to honor the MAP grant awards during the year, DePaul must absorb about $20 million of grants it has already credited to students' accounts,” Moody’s said.
DePaul, like the other higher education institutions in Illinois, expects the state will make good on the funds once a fiscal 2016 budget is passed although lawmakers and Gov. Bruce Rauner remain at loggerheads on a spending plan nine months into the fiscal year.
The school’s other challenge include competition from other Chicago higher education institutions for students, modest net tuition revenue growth, relatively modest gift revenue, and thinner operating cash flow reflecting program investments.
The school reported total cash and investments growing to $676 million in fiscal 2015 from $537 million in fiscal 2011.
The school will use $80 million in cash to fund its share of a new arena that will be owned by the Metropolitan Pier and Exposition Authority as part of an entertainment district being established around MPEA’s McCormick Place Convention Center that also includes a new hotel.
DePaul entered into an anchor tenant agreement to lease the facility for its Blue Demons men's and women's basketball teams.
The events center carries a $164 million price tag, up from an original price tag of $140 million. The project’s costs are being split between the authority and DePaul. The authority is tapping previously issued bond proceeds to cover its share. The city is contributing some funds to the project for infrastructure through tax-increment financing.
