The University of Connecticut plans to issue $200 million of general obligation debt-service commitment Series 2011A new-money bonds, and $20 million of Series A refunding bonds, beginning with a two-day retail period that commences Friday.
According to John Sullivan, the university’s manager of treasury services, the fixed-rate, tax-exempt GO bond proceeds will help finance capital improvements under the UConn 2000 Infrastructure Improvement Program.
The improvements include $137.5 million for the flagship Storrs and regional campuses, and $62.5 million for replacement of the John Dempsey Hospital at the UConn Health Center in Farmington, a Hartford suburb.
The actual par amount of the bonds will be determined at pricing, Sullivan said.
The general obligation of the university and the state’s pledge to pay the debt service under the UConn 2000 Act, passed in 1995, secure the bonds.
Loop Capital Markets is leading the underwriting team. Pullman & Comley LLC is bond counsel and the Law Offices of Joseph C. Reid PA is co-bond counsel.
Hawkins Delafield & Wood LLP and Hardwick Law Firm LLC are counsel for the underwriters. Day Pitney LLP is disclosure counsel for the state of Connecticut.
The new-money bonds will mature from 2012 to 2031, while the refunding bonds will mature from 2012 through 2023. Sullivan expects the refunding to save the university about $20 million.
No swaps are involved, according to Sullivan.
“This is a plain-vanilla, straightforward bond deal, as has been the entire UConn 2000 program,” he said.
While past issuances have included serial and term bonds, the mix this time will be determined at pricing, he added.
In the past, bonds generally have been callable in 10 years at par, though Sullivan said this, too, would be established at pricing.
According to the university, the new health center will provide for increased capability for bioscience research, a priority for Gov. Dannel Malloy since he took office in January.
Last month, the General Assembly approved a $291 million bond measure to help genomics research company Jackson Laboratory of Bar Harbor, Maine, build a $1.1 billion research center adjacent to UConn Medical.
The project will also involve Yale University.
Standard & Poor’s rated the bonds AA-minus with a stable outlook, while Moody’s Investors Service assigned a Aa2 with a negative outlook.
“In our view, the debt-service payment mechanism established by the statute and bond documents … provides strong bondholder security,” S&P wrote. “The state has a long track record of supporting investments in the university.”
Fitch Ratings has assigned a AA-minus to the bonds, one notch below its GO rating for the state. "Higher education is a constitutional state priority, and legal protections are strong," Fitch wrote.
Since passage of UConn 2000, the legislature has expanded and extended the program three times.
Its current program extends through 2018 and totals $3.06 billion, including $2.7 billion of bond authorization secured by the debt service commitment.
Moody’s said its negative outlook reflects the state’s depleted capital reserves and slim prospects for short-term replenishment, and pension-funding ratios that are among the lowest in the county.
The Pew Center on the States reported in April that Connecticut’s pension funding ratio is 62%, well below the 80% it considers desirable.
“In the absence of a clearly articulated plan to achieve meaningful improvement in the state’s pension funded ratios and reduce its fixed costs, as well as progress toward adequate reserve levels, Connecticut’s rating may be downgraded,” Moody’s wrote.
