CHICAGO — Washington University in St. Louis will enter the market Thursday with nearly $200 million of new-money and refunding revenue bonds that will help finance projects and introduce taxable bonds into the top-rated school’s debt portfolio.
JPMorgan and Morgan Stanley are co-senior managers on the fixed-rate transaction that is being offered in three series. The Missouri Health and Educational Facilities Authority is the conduit issuer and Gilmore & Bell PC is bond counsel.
The $24 million Series A represents new money and will help finance the construction of a new engineering building and renovations to existing buildings, including its aging Umrath Hall. A $96.7 million Series B and $77.4 million Series C will current refund outstanding debt that is callable.
The C series is taxable and will refund debt originally issued to finance facilities related to the university’s research and medical school.
The tax-exempt refunding will achieve at least 5% present-value savings and the taxable piece will also achieve some savings, but a lower level. The university opted to shift to a taxable structure to allow it more freedom in planning for the future use of the buildings and debt management without the restrictions imposed by the federal tax code.
“It gives us some savings and more flexibility down the road,” said Amy Kweskin, associate vice chancellor for finance and treasurer. She said her staff had been watching the market and decided to take advantage of the improved attraction for taxable municipal debt.
Ahead of the sale, Moody’s Investors Service affirmed the school’s Aaa and top short-term marks assigned to a total of $1.2 billion of rated debt, while Standard & Poor’s affirmed its AAA rating.
Moody’s said the school’s high rating reflects its “prominent position as a comprehensive research university, with healthy student demand in a highly competitive landscape, consistently positive operating performance, and a large, well-managed financial resource base.”
The credit benefits from the university’s extensive research activities, which accounted for $472.5 million in expenses in fiscal 2010. The school served 12,645 full-time students, generating operating revenue of $2.17 billion.
Its financial resources of $5.45 billion included unrestricted cash and investments with monthly liquidity of $2.17 billion. Expendable resources provided 3.3 times debt service coverage. Student charges represent 16% of its operating revenues and another 33% comes from patient care.
Its challenges include a relatively high exposure to its health care services. The school has a large faculty-practice plan and relationships with affiliated hospitals partnering in the Washington University Medical Center.
The school also faces significant competition from top-tier universities nationally, according to Moody’s.
