DALLAS -- The University of Michigan begins the New Year with a $450 million general revenue bond deal.

The bonds will sell as soon as Wednesday with Morgan Stanley and Bank of America Merrill Lynch as senior managers. Citi and Goldman Sachs are co-managers. Miller Canfield is bond counsel.

Approximately $185 million of the sale will finance the university's ongoing capital program and refinance portions of issues from 2009 and 2010 of general revenue bonds, a portion of a 2012 general revenue bond series, and outstanding commercial paper. The university faces repayment of a $68 million bullet maturity from the 2012 issue this April.

The bonds are expected to also refund about $176 million of debt originally issued by Metropolitan Hospital, which is now affiliated with the university.

On December 15, 2016 the university and UM Health closed an affiliation transaction with Metropolitan Health Corporation, making UM Health the sole corporate member of Metro Health.

A portion of the new money bond proceeds will help finance a new biological science building scheduled to be completed in the summer of 2018 and a new athletic center that will become the future home for men's and women's track and field, cross country, lacrosse, soccer and women's rowing.

General revenues from tuition, fees, auxiliary revenues, indirect cost recoveries, hospital gross revenue, patient service revenue, faculty group practice plan revenue, and unrestricted investment income are pledged to the bonds. The funds totaled more than $5 billion in fiscal 2016. General revenues exclude state appropriations and the revenues of Metro Health although any cash payments received by the university from Metro Health or its controlled affiliates for allocated debt service on the bonds will constitute general revenues.

"The pledge of general revenues reflects the strength of market demand, significant healthcare operations and consistent operating performance derived from a well-diversified revenue base," said university treasurer John Sullivan in a recorded investor presentation.

Ahead of the sale, Moody's Investors Service and Standard & Poor's affirmed the Michigan Board of Regents' Aaa and AAA ratings on $2 billion issued on the university's behalf. The outlook is stable.

UM is the state's flagship among 15 public universities. It has an enrollment of more than 56,000 at its main campus in Ann Arbor and two other campuses in Dearborn and Flint.

The university had total operating revenues of $7.2 billion last year with cash and investments of $11.6 billion and an endowment of $11.5 billion, according to Moody's. State operating appropriations are only 5% of the university's overall revenue but are "a more material revenue stream" for UM's Dearborn and Flint campuses, according to Moody's.

The state also provides a modest amount of capital funding with three projects currently in the programming planning stage. If approved, the state is expected to provide $89 million of the $251 million projected costs.

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