CHICAGO — Ohio State University today will begin taking retail orders on a refunding issue that will range in size from $154 million to $274 million in order to eliminate some of the school’s variable-rate debt and achieve savings on its existing fixed-rate bonds.

The transaction comes as the Big Ten university prepares to launch a $1 billion expansion plan that relies on at least $925 million of borrowing.

OSU plans to enter the market in late summer or early fall with $450 million of new-money bonds to begin financing the plan.

The school will select a finance team to lead the deal this summer after issuing a request for qualifications this spring, said Alvin Rodack, OSU’s senior director of financial services.

Morgan Stanley is the senior manager on today’s transaction, leading an underwriting team of three additional firms. Peck, Shaffer & Williams LLP is bond counsel.

The transaction will refund at least $154 million of variable-rate bonds, shifting that debt into a fixed-rate mode.

The team will also consider refunding up to $120 million of fixed-rate debt if it can achieve a present value savings of 4%, Rodack said.

“This wasn’t a deal that we originally planned, but because the interest rates are so low by historical standards we felt it was a good time to take some of variable-rate risk off the table,” he said.

Moody’s Investors Service rates the debt Aa2 and Standard & Poor’s rates it AA.

The university opted not to hire Fitch Ratings this time around, Rodack said.

OSU’s debt totals around $1.4 billion, which includes its commercial paper program.

After this week’s transaction, between 25% to 30% of the school’s portfolio will remain in floating-rate mode, according to Rodack.

“We think it’s important to have a variable-rate component to our debt structure,” he said. “We’re just trying to limit it.”

The university’s $1 billion capital plan would double its debt load.

Dubbed ProjectOne, the plan will mark the largest job-generating initiative in Ohio, and aims to create up to 10,000 new, full-time jobs and 5,000 construction jobs, school officials said.

OSU — which is one of the largest schools in the nation — plans to issue at least $900 million over the next six years to finance the plan.

The university plans to partially offset the new debt by retiring $300 million of debt by 2014, according to Moody’s analysts.

The biggest projects include the expansion of OSU Medical Center and the school’s student housing stock.

Like its counterparts across the state, OSU last year escaped deep cuts in state aid after Gov. Ted Strickland and the state General Assembly crafted a last-minute plan to fill an estimated $850 million deficit without cutting higher-education funding.

But as the state continues to struggle with declining revenues, the future of the state’s higher-education funding is uncertain.

“This year it’s not really affecting us because the governor and the Legislature protected higher education in the state from most of the budget cuts,” Rodack said.

“We don’t know about next year yet, so we’re being very cautious about future borrowing, and revenue and setting tuition and other fees,” the financial services director said. “But the governor and the legislature have been very supportive [of higher-education funding] in the last few years.”

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