Temple University, a public research university in Philadelphia, is issuing $200 million of debt on Tuesday to fund capital projects under its ongoing campus development plan.
The Pennsylvania Higher Educational Facilities Authority will sell the revenue bonds for the school.
Citi is lead underwriter and Stevens & Lee is bond counsel.
The bonds will be structured as serial, maturing from 2013 through 2032, and term, with a 2037 and 2042 maturity.
Proceeds will go toward funding or reimbursing Temple for costs for seven of its capital projects, said Eryn Jelesiewicz, a spokeswoman for the university.
Projects include a new building for the School of Architecture, a residence hall, a library and a Science, Education and Research Center, as well as the renovation and expansion of recreation halls, a football facility and engineering facilities.
Ahead of the bond sale, Moody’s Investors Service revised its outlook on Temple University’s Aa2 rating to stable from negative, based on the same outlook revision on the Temple University Health System Inc.’s debt, which was downgraded to Ba1 in May.
The university is the sole member of Temple University Health System, a nonprofit corporation. The university has no liability for the health system’s debt.
Temple’s Aa2 rating reflects its market position and solid student demand, as well as its favorable operating performance and cash-flow generation, Moody’s analysts said. Challenges include a highly competitive student market and a trend of reduced state funding.
The bonds are backed solely by payments from the university and secured by Temple’s pledge of its gross revenues, which include appropriations from Pennsylvania.
For fiscal 2012, the appropriation was originally about $140 million, but as a result of shortfall in the state’s revenues, the appropriation was reduced to about $133 million.
Standard & Poor’s assigned an A-plus rating, and also cited the declining levels of appropriations over past years.
“In response to declining appropriations, Temple has maintained strong operating performance, implemented several efficiencies, and made investments in the areas of institutional advancement and research,” analysts said in a report.
Also on Tuesday, the New Jersey Economic Development Authority will begin retail pricing for its $400 million of school facilities construction bonds and notes.
Institutional pricing is expected to continue on Wednesday, according to a spokesperson for the lead underwriter, RBC Capital Markets.
The deal includes $137 million of school facilities construction bonds and $240 million in two series of school facilities construction notes, which are being issued to finance construction projects for elementary and secondary education facilities in the state.
About $24 million of federally taxable school facilities construction bonds will refinance outstanding bonds maturing on Oct. 31.
The notes will mature in 2015 and 2017, and will bear interest at a floating rate based on a fixed spread to the Securities Industry and Financial Markets Association index, established at pricing.
Debt service on the bonds is paid under a state contract between the treasurer and the authority, subject to annual legislative appropriation. Both Moody’s and Fitch have assigned their respective A1 and A-plus ratings based on the authority’s need for annual appropriation.
“The essentiality of the authority’s school facilities financing program, and the importance of maintaining access to the capital markets, provides strong incentive for the state to make these appropriations,” Moody’s analysts said in a report. The rating is notched off of New Jersey’s general obligation bond rating of Aa3. Fitch rates New Jersey bonds AA-minus.
According to the preliminary official statement, there are no remedies in the event of a non-appropriation.