BRADENTON, Fla. - The double-A rated University of Kentucky, the state's flagship, prices $244 million of general receipts bonds on Tuesday amid a light competitive calendar.

A general lack of supply to meet investor's demands should also lower borrowing costs, according to MMA's Matt Posner in an issuer's brief Feb. 24.

The UK deal is structured with two tax-exempt pieces: $195.4 million of Series A bonds and $38.4 million of Series B bonds. Another $10.12 million of Series C taxable bonds also will be priced.

Proceeds will finance portions of a new $110 million, 263,000-square-foot science building with teaching labs, a $100 million renovation of the 41-year-old football stadium to add features such as private suites and club seats, a new kitchen, renovated restrooms and concessions, and a $65 million renovation/expansion of the Gatton College of Business and Economics that includes a full trading complex for finance students.

An array of general funds, private gifts, and $65 million from the intercollegiate athletics department are financing the science building, according to Eric Monday, executive vice president of finance and administration.

"We think that is very distinctive in higher education," he said, referring to the use of funds typically reserved for sports. "We really are pleased to have the ability to do this, and to see this kind of support from the athletics department."

Another distinctive factor about the stadium, science and business projects is that no state funds are being used, Monday said.

"We are amending the indenture to add athletic revenues that have not been part of pledged revenues in the past," said interim treasurer Susan Krauss. "I think it's very important to remember that the athletics department is paying a significant amount of debt service on these bonds."

Another feature of the offering is that the $38.4 million tax-exempt piece is being sold with an eight-year call, instead of the typical 10-year call, because the university expects to receive a gift for the Gatton project in five to eight years, she said.

"This transaction affords investors the increasingly rare chance to buy a high-grade name that consistently produces strong operating results in what are otherwise challenging sectors, higher education and health care," said Chip Sutherland, senior vice president with J.J.B. Hilliard, W.L. Lyons LLC, the UK's financial advisor.

"With multiple structures of varying size and type, this offering will appeal to a wide range of portfolios both large and small," he said." Both rating agencies acknowledge UK's impressive management team which we believe was a factor in the recently revised credit outlook."

Standard & Poor's rated the bonds AA-minus and revised its outlook to positive from stable, citing the potential for a rating upgrade due to a favorable student enrollment trend, rising patient volume at UK Healthcare, in addition to strong market share and profitability.

"The university's financial resources continue to grow and are not diminished by additional debt needs," S&P analyst Ken Rodgers said.

The university has submitted a request to the state for authorization to issue up to $405 million of bonds to finance multiple capital projects across campus, according to bond documents.

Moody's Investors Service assigned the 2014 bonds its Aa2 rating, with a stable outlook, and said it "reflects the university's prominent position as the flagship academic institution and its role as a major health care provider for high-end services for the Commonwealth of Kentucky."

The rating also reflects consistently positive operating performance and substantial financial resources, Moody's said.

The University of Kentucky, a land grant institution in Lexington, saw 28,928 students enroll last fall, the third year enrollment broke a record.

The university's long-term endowment was $1.05 billion as of June 30, 2013, which recorded an 11.6% fiscal year return, according to Moody's. The college has a defined contribution retirement plan that is fully funded.

In 2012, the university entered into a public-private partnership with a developer to construct and manage a 601-bed housing complex, "which successfully opened in fall 2013 to full occupancy," Moody's said. Additional phases of the privatized housing program are planned.

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