A two-day retail order period for the University of Connecticut’s planned $288.2 million general obligation bond sale will begin Friday.
The institutional Series 2020A sale of $169.5 million of new-money bonds and $118.7 million of refunding bonds is set for Tuesday.
Loop Capital Markets is lead manager.
Moody’s Investors Service rates the bonds A1, while S&P Global Ratings and Fitch Ratings rate them A-plus and A, respectively. All three provide stable outlooks.
PFM is municipal advisor while Pullman & Comley LLC and the Law Offices of Joseph C. Reid PA are co-bond counsel.
Moody’s on Nov. 12 downgraded the school’s student fee revenue bond rating to A1 from Aa3, citing COVID-19 related pressures.
“The university maintains solid student demand with good enrollment diversification and a growing research enterprise, although historically strong pledged revenue coverage of student fee revenue bonds will significantly narrow for fiscal 2021 due to the business disruption caused by the coronavirus outbreak,” Moody’s said.
“Similarly, the university's operating performance will soften for fiscal 2021, although the magnitude of contraction will be tempered by leadership's demonstrated financial stewardship and actions to adjust expenses.”
The school’s director of treasury services, John Sullivan, said the schools fundamentals are strong and called the pandemic a “temporarily blip.” Speaking on the day of the downgrade, Sullivan said the student fee revenue bonds deserved a better rating.
UConn, the state’s flagship university, began in 1881 as one of the nation’s nine colonial land-grant colleges. UConn has its main campus in Storrs, four undergraduate regional campuses, its Hartford law school and the medical and dental schools at the University of Connecticut Health Center’s Farmington campus.
The health center, while an organizational unit of UConn, is legally distinct for budgeting, maintaining operating funds and receiving state appropriations. “Finances are not consolidated within UConn’s audit and patient-related revenue is not pledged to bondholders,” Moody’s said. With a revenue base of more than $1 billion, the center has its own budget challenges the coronavirus has worsened.
For fiscal 2019, combined state appropriations and debt service commitments to UConn totaled nearly $500 million, or 36% of total revenue. While acknowledging the practice of cutting appropriations, UConn officials report annual state appropriation increases of 5% to 6% for both FY20 and FY21.
“With such a high dependence on state funding, the university's credit quality will remain closely linked to that of Connecticut,” Moody’s said.
Gov. Ned Lamont and state lawmakers face a deficit of roughly $900 million this fiscal year and revenue gaps of $1.3 billion and $1.5 billion over the following two years. Connecticut operates on a biennial budget.
Still, the deficit is lower than projected, thanks to additional tax withholdings from the state’s wealthiest residents.
