UConn sale of student fee revenue bonds to fund recreation center

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The University of Connecticut intends to sell $152 million of UConn 2000 special obligation student fee revenue bonds next week.

The negotiated sale of 2018A revenue bonds will mark the university’s first new-money series for this credit in 16 years, said its manager of treasury services, John Sullivan.

Retail pricing is scheduled for March 12 and 13 with the institutional sale March 14. Jefferies is lead manager.

According to Sullivan, this sale marks the seventh series of special obligation student fee revenue bonds and its fourth new-money issue. The school plans to use proceeds to build a student recreation center at its main campus in Storrs, about 28 miles northeast of Hartford.

The bonds, payable from the university’s pledged revenues, are structured to provide level debt service over roughly 29 years with semiannual interest.

Design is well under way for the new three-story, 191,000 square foot student recreation center scheduled to open in July 2019.

It will include about 30,000 square feet of fitness space; a four-court gymnasium; two multipurpose activity courts; an indoor running track, an aquatics center with a 25-meter pool and a recreational pool; a climbing center; racquetball courts; an outdoor recreation center and functional training and multipurpose rooms.

The UConn 2000 infrastructure improvement program, under the UConn 2000 Act passed by the state legislature and signed by then-Gov. John Rowland in 1995, provides for a 32-year, $4.6 billion capital program in three phases.

Major projects under the initiative have included the relocation of the university’s Greater Hartford campus from suburban West Hartford to the former Hartford Times building in downtown Hartford; and an innovation partnership building under construction.

Moody’s Investors Service and S&P Global Ratings rate the special obligation bonds Aa3 and AA-minus, respectively, both with negative outlooks. Each rates the bonds one notch higher than its rating on the state’s general obligation.

Moody’s said its rating “reflects the scope of the university’s operations as well as its solid results, the strength of pledged revenues and substantial state capital funding resulting in low direct debt obligations.”

Both S&P and Moody’s referenced UConn’s reliance on a budget-stressed state for funding in their negative outlooks.

“UConn’s financial performance and available resources, though improved for fiscal 2017, are nevertheless slightly weak for the current rating, and with ongoing state budgetary pressure, they may not improve even with continued favorable revenue and expense management,” S&P said.

Still, S&P added, “The AA-minus rating on the university’s bonds better reflects its favorable enrollment trend, increasing selectivity and higher graduation rate for the rating category compared with medians and peers.”

Pullman & Comley LLC is bond counsel and the Law Offices of Joseph C. Reid PA is co-bond counsel. Hawkins Delafield & Wood and Nixon Peabody LLC are representing the underwriters. Public Financial Management Inc. is the financial advisor.

The university has also scheduled a $300 million negotiated sale of UConn 2000 general obligation debt service commitment bonds for next month. A one-day retail period on April 10 will precede the institutional sale.

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Primary bond market Higher education bonds Moody's S&P Connecticut