The University of Connecticut March 30 will sell $150 million of fixed-rate, tax-exempt bonds to help finance new buildings and campus renovations, with the state paying debt service on the new-money debt.
The offering is part of the school’s UConn 2000 infrastructure improvement program, which enables the school to issue bonds with annual state appropriations covering debt service costs. The debt is an obligation of the university.
JPMorgan will kick off a two-day retail order period followed by institutional pricing on April 1, according to John Sullivan, UConn’s manager of treasury services. As in the past, the university will look towards retail investors to help absorb the bonds.
“We’ve had tremendous retail demand — I mean tremendous,” Sullivan said. “We’ve sold some entire bond issues with retail. This is rather a larger bond issue for us, but we also weren’t in the market last year so I think there’s a lot of pent-up demand for UConn bonds. We’re hoping to see at least half of it in retail, if not more.”
Loop Capital Markets LLC, Ramirez & Co., and Wachovia Bank NA are co-senior managers on the upcoming deal. P.G. Corbin & Co. and First Southwest Co. are the co-financial managers and Pullman & Comely LLC and Joseph C. Reid PA of New York are co-bond counsel.
The transaction will include serial maturities of $7.5 million each year from 2010 through 2029, according to the preliminary official statement.
Fitch Ratings and Standard & Poor’s rate the general obligation UConn bonds AA-minus and AA, respectively. Moody’s Investors Service rates the credit Aa3. The school has roughly $700 million of outstanding GO debt secured by Connecticut’s pledge to pay debt service.
The university also has $174.5 million of special obligation bonds, with the school paying principal and interest costs on those securities.
Bond proceeds from the Series 2009A bonds will support new classroom buildings for the liberal arts program, a new social science building, and renovations throughout the campus, as well as deferred maintenance projects.
School officials will now embark on construction plans that can be finished with the bond proceeds from the upcoming sale and an anticipated fiscal 2010 state-contract bond deal, as Gov. M Jodi Rell has said she will not sign off on additional bonding capacity at this time due to the state’s fiscal challenges.
“What we tried to do here is to say, don’t start anything you can’t reasonably finish with these two bond issues,” Sullivan said.
While the university will still have $105 million of previously authorized bonding capacity after the sale of the Series 2009A bonds, Rell said she will not approve a fiscal 2010 UConn agreement that would authorize $140 million of additional borrowing until the state’s fiscal condition improves.
On March 3, Rell signed a measure that will close a $1.2 billion deficit in the fiscal 2009 budget through federal stimulus funds, rainy-day funds, and revenue enhancements. State officials project a $2.91 billion shortfall for fiscal 2010, which begins July 1.
“Accordingly, the university is investigating several alternative program plans, project phasing, scheduling, and funding requirements to maintain program continuity while also prioritizing project needs, should the governor not approve the fiscal year 2010 bond authorization as she has indicated,” according to the POS.
In addition to paying the debt service on the UConn GO bonds, the state allocates funds to the school each year to help with operating costs. The university received $239 million in state appropriations in fiscal 2009 and requested allocations of $259.1 million and $271.1 million for fiscal years 2010 and 2011, respectively.