DALLAS – Tulane University in New Orleans will finance the next phase of its post-hurricane renewal effort with Wednesday’s negotiated sale of $98.6 million of revenue bonds.
The private university adopted a recovery plan after suffering an estimated $650 million of damage and losses from Hurricanes Katrina and Rita in 2005. Projects funded with proceeds from this week’s sale include a new football stadium, a 256-bed residential hall, and infrastructure renewal at the campus in New Orleans’s Uptown.
The sale includes $61.4 million of tax-exempt revenue bonds issued for the university by Louisiana Public Facilities Authority and a $37.2 million taxable tranche from the Administrators of the Tulane Educational Fund.
A one-day retail-institutional sales period was the best approach, said Lee Bressler, managing director for Raymond James & Associates Inc., the underwriter for both issues.
“There will be retail interest, but these are all long bonds that will be attractive to the institutional investors,” Bressler said.
Maturities on the tax-exempt bonds begin in 2036 and end in 2040. The taxable tranche maturities span from 2042 to 2048.
Foley & Judell LLP is bond counsel.
Both tranches are rated A by Standard & Poor’s and A2 by Moody’s Investors Service. Tulane will have $642.5 million of outstanding debt with this week’s sale.
Moody’s lowered its outlook on Tulane’s debt to negative from stable in December due to “thin and declining unrestricted liquidity.” The report said Tulane had monthly liquidity of $92 million at the end of fiscal 2012, or 46 days of cash on hand.
Standard & Poor’s lowered Tulane’s credit rating to A from A-plus in December, with a stable outlook.
"Although we believe that Tulane has come a long way since Katrina hit in 2005, the university has still not been able to return to positive operations and the additional debt issuance puts considerable strain on the university's resource ratios," said credit analyst Carlotta Mills.
Tulane had an endowment of $1 billion and operating revenue base of $770 million at the end of fiscal 2012.
Work is under way on the new $62 million Yulman Stadium on the Uptown campus following an agreement with the city of New Orleans in late January. The football stadium, which will seat 25,000 spectators and accommodate a total of 30,000, is slated to be open for the 2014 season.
Tulane has not hosted a football game at an on-campus stadium in almost four decades, said Athletic Director Rick Dickson.
“The Green Wave will have the home field advantage that we have missed for the last 35 years,” he said.
The stadium is being financed with $12 million of the proceeds from the taxable tranche and $35 million from January’s $36 million sale of revenue bonds by the LPFA for Tulane.
Tulane has received $8 million in private donations for the stadium project, and expects to raise at least another $7 million. The bonds will be supported by university revenues, but Tulane expects to pay the stadium project’s debt service and principal through donations.