Georgia's Life University Returns to Market With $70M Deal

ATLANTA - Investors this week will have the chance to pick up some Georgia paper from an issuer that hasn't been in the market for more than 10 years when Life University in Marietta issues about $70 million of below investment-grade debt through a conduit.

The bonds will be sold by the Marietta Development Authority, with Citi as the book-runner, and Morgan Keegan& Co. making up the rest of the underwriting team. McKenna Long & Aldridge is bond counsel.

The deal is composed of term bonds. There are $8 million that mature in 2018, $18 million that mature in 2028, and $45 million that mature in 2039. Proceeds will be used to current refund the Series 1995A bonds, which totaled about $15 million when they were sold. They now total about $9.55 million. Series 1995B bonds that were originally issued in the amount of $21.9 million will also be refunded. About $17 million of them are outstanding now.

The new-money portion of the deal will be used to construct and renovate the chiropractic college campus to add 300 beds, a parking deck, a health center, a gym, a café; and to carry out landscaping projects.

While the paper does not carry the highest ratings - Ba3 from Moody's Investors Service - one observer said that the university's deal could pique the interests of institutional investors looking to line their portfolios with more Georgia debt. An ongoing point made by investors is the relatively low flow of paper from Georgia issuers.

Moody's is the only major agency to rate the Life University bonds. The bonds will not be insured and there are no other credit enhancements in place, said William Jarr, the vice president of operations and finance for the university.

He agreed that the deal would be largely accepted by institutional investors rather than retail investors.

One potential investor pointed out that there continues to be a lack of high quality paper from Georgia issuers. And though this deal has been rated at the B level, this credit has shown that it is recovering from the financial straits that plagued it a few years ago, she said, referencing the period when the university lost its accreditation because of concerns about its curriculum and poor management. As a result of the accreditation loss in 2002, the university - once the largest chiropractic university in the country - saw its enrollment figures plummet.

The university's efforts have been rewarded by Moody's, which dropped the credit several notches to B2 during the accreditation crisis. It now rates it Ba3.

To deal with the problems, the university brought in a new management team, which developed a plan that was to address the most pressing issues the university faced, as well as ease investor concerns that the university could go out of business.

The accreditation was restored in 2003 by the Commission on Accreditation of the Council on Chiropractic Education.

University officials sold most of its campus to Southern Polytechnic State University, which is also located in Marietta.

Jarr said that next week's deal will be the last for the university for the foreseeable future. He also said that the exact date, and details such as how much in net present savings value the refunding piece of the deal could generate, were still being determined.

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