The Massachusetts Institute of Technology last week sold $750 million of taxable bonds that mature in 100 years.
Barclays Capital priced the deal on Wednesday. The transaction yielded 5.623% on a 5.6% coupon, which is 130 basis points above 30-year Treasuries.
The Series 2011B bonds carry triple-A ratings from Standard & Poor’s and Moody’s Investors Service. MIT had $1.7 billion of outstanding debt as of June 30, according to the official statement.
While the bonds do not mature until July 1, 2111, MIT has the option to redeem the debt in whole or in part at any time either at par or based on the Treasury rate, plus 20 basis points.
“The university will have the ability, though at a significant cost, to call the bonds before the scheduled maturity dates through a 'make-whole’ provision,” according to a Moody’s report. “The make-whole provision allows MIT to call a portion or all of the bonds at any time, for the greater of par, or a premium based on Treasuries plus a spread. The use of taxable debt also provides flexibility in the use and investment of bond proceeds relative to tax-exempt debt.”
The school plans to use the bond proceeds to help finance capital projects and issued the “century bonds” as a way to secure lower borrowing costs.
“MIT views this offering as locking in a historically low cost of capital for a very long period of time, while at the same time providing an effective hedge against inflation,” a university press release said.
Enrollment in 2010-11 is 10,566, including 6,108 full-time graduate students. Undergraduate and graduate tuition for the current school year is $39,212.