University of Dayton using forward delivery to refund bonds

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The University of Dayton will use a forward delivery structure to refund bonds.

The university, using the state of Ohio as a conduit, will price about $49 million of bonds Wednesday to refund 2009 debt for savings, and close on the deal in September.

It is also selling about $69 million of new money tax-exempt bonds for various projects, including renovations and upgrades to the university's arena, the construction of a new 96-bed apartment style facility, and construction of offices and teaching space in the university's cybersecurity lab.

Security for the higher educational facility revenue bonds includes an unconditional guaranty by the university of payment of debt service.

Forward delivery bonds are an alternative to tax-exempt advance refundings, which are banned under the new federal tax law. This is where an issuer sells tax-exempt bonds to an underwriter under a bond purchase agreement with a longer-than-normal delivery date so that the closing occurs within 90 days before the redemption date of the bonds to be refunded.

Wells Fargo Securities will underwrite the deal.

Moody’s Investor Service rates the bonds A2 and S&P Global Ratings rates the bond A-plus. The outlooks are is stable. The university has $426 million of outstanding debt.

The university’s arena renovation is expected to cost $76 million and over $30 million of cash gifts have been raised for the project as of April 16, 2018. The renovation includes the replacement of all 13,450 seats and upgrades like adding air conditioning and new WiFi, new seating and upgrade of all plumbing lighting and infrastructure. The renovations are expected to be completed by October 2019.

The arena hosts the "First Four" games of the NCAA men's basketball tournament, and the renovation is expected to help hold the university’s place as the kickoff venue of March Madness.

Established in 1850, the University of Dayton is a mid-sized Catholic comprehensive private university. It had $529 million in total revenue in fiscal 2017. Fall enrollment for the 2017-18 academic year was 10,882 student.

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Refunding bonds Tax reform Higher education bonds Primary bond market State of Ohio Ohio