University of Minnesota pricing $425 million

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CHICAGO – The University of Minnesota heads into the market Wednesday with $425 million of double-A rated paper in a new money and refunding sale that will raise funds for athletic projects.

The deal is coming in three series, including $118.4 million of new money to help cover costs of its Athletes Village project, construction of a new competition-level track and field facility, and the relocation of some existing fields, and other projects.

The Athletes Village project is a new set of three structures totaling 320,000 square feet on the Minneapolis campus that will “serve all student athletes as a hub and flagship for the university’s Twin Cities Department of Intercollegiate Athletics” with basketball and football practice facilities, according to the offering statement.

Construction began in March 2016 on the $166 million facility and is expected to be completed in January.

The B series for $293.1 million and taxable C series for $13.3 million will refund outstanding debt issued in 2009 and 2011.

RBC Capital Markets is running the books with another four firms serving as co-managers. PFM Financial Advisors LLC is advising the school and Dorsey & Whitney LLP is bond counsel.

Ahead of the sale, Moody's Investors Service assigned the same Aa1 rating and stable outlook to the general obligation bonds that is carried by $787 million of outstanding GOs. It reflects the university’s “excellent strategic positioning reflected in strong student and research market positions and ample balance sheet reserves,” Moody’s said.

The university receives solid state support including payment of debt service on $252 million of special purpose revenue bonds that Moody’s rates at Aa2. Challenges include the university’s relatively thin operations compared to peers and expected substantial new debt issuance.

The University of Minnesota was founded in 1851 and has a national draw as the state’s flagship and land-grant university and a Big Ten conference member. It benefits from total revenues of nearly $3.4 billion including $788 million of research awards for fiscal 2016. It operates campuses in the Twin Cities, Duluth, Morris, Crookston, and Rochester serving 67,000 students.

S&P Global Ratings affirmed its AA rating and stable outlook on the school’s GOs.

The school experienced improved fiscal performance in 2015 and 2016 and received “favorable philanthropic support” slightly in excess of $300 million in pledges and contributions in each of the past three fiscal years. Challenges include significant debt of $1.48 billion when counting the issue Wednesday and planned issuance of $221 million over the next two fiscal years. The university will retire about $180 million in debt over that same period, S&P said.

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Primary bond market Higher education bonds Sell side Regents of the University of Minnesota Minnesota