Reed College, a selective private liberal arts college in Portland, plans to refund $47.1 million of auction-rate securities next week. The ARS were originally issued in 2006 with insurance from XL Capital Assurance.
Reed plans to replace the ARS with variable-rate demand obligations issued in weekly mode via the Oregon Facilities Authority. The tax-exempt deal will include serial bonds maturing between 2008 and 2038.
UBS Securities LLC is the underwriter, and Wells Fargo Bank will provide liquidity via a standby bond purchase agreement. Stoel Rives is bond counsel.
The college plans to maintain an interest rate swap it entered into with UBS when it first issued the ARS. Under the swap, Reed pays UBS a fixed rate of 3.86% and receives a variable rate of 67% of the one-month Libor.
Reed’s revenue bonds are rated Aa2 by Moody’s Investors Service and AA-minus with a positive outlook by Standard & Poor’s.
Moody’s cited the college’s “substantial” financial resources and “strong student market position with a national draw” in initiating coverage of the credit Wednesday.
Standard & Poor’s said the school’s strengths include a “moderate” debt burden, “good history of fundraising,” and $470 million endowment.