CHICAGO — The Iowa State Board of Regents will competitively sell $20 million of debt Thursday in the final financing for the $43 million reconstruction and expansion of the Carver-Hawkeye Arena at the University of Iowa.
Springsted Inc. is financial adviser on the sale and Ahlers & Cooney PC is bond counsel. Moody’s Investors Service rates the athletic facilities system revenue bonds Aa2. Standard & Poor’s rates the debt AA-minus.
The school has a total of $881 million of debt outstanding that is backed by various revenue streams, including $133 million of athletic facilities bonds.
The bonds mature serially between 2012 and 2036 and are secured by net revenues from the school’s athletic and recreational facilities, which include a mandatory student fee. The Iowa City university expects to complete the renovation and expansion project next year.
The project — approved by the university in 2008 — includes the addition of a multi-court facility and a strength and conditioning center, and the renovation of its existing wrestling facilities.
Moody’s said the school’s ratings are supported by its position as the state’s flagship public university, its membership in the Big Ten athletic conference, strong research position, favorable operating performance, and a healthy resource cushion. The school serves 27,500 full-time students, had $466 million in research grants for fiscal 2010, and expendable financial resources of more than $1 billion in fiscal 2009.
The university’s challenges include recovering from Iowa City flooding that caused $734 million of campus damage in June 2008. Its final costs are estimated at just $150 million and that burden will be covered in part through the issuance of $123 million of academic building revenue bonds.
The school is also challenged by its plans for future debt issuance and its exposure to health care sector strains at its University of Iowa Hospitals and Clinics. The state cut university funding in its fiscal 2011 budget by $34 million — up from a $9 million cut in fiscal 2010.
“Regardless, we expect the university to continue to produce favorable operating performance driven by tuition and auxiliary fee increases, coupled with continued expense management,” Moody’s analysts wrote.