The University of Southern Indiana plans to price $36 million of bonds to fund the final construction phase of its Physical Activity Center.
The bonds are scheduled to price on Jan 23. Proceeds will fund the second phase of renovation and expansion at the facility, including the addition of a competitive-level swimming pool and class rooms for sports science programs.
The first phase, funded by appropriations from the state, includes a new 4,800 seat sports arena that will be completed sometime this spring.
The bonds are secured by student fees and are eligible for debt service reimbursement. Fee replacement appropriations are used to reimburse debt service paid by Indiana universities on approved bond issues.
Evansville-based USI has roughly $72.5 million of these fee replacement bonds outstanding as of Jan. 1, 2019. The bonds account for approximately 90% of USI's pro forma debt, according to Moody’s Investors Service.
Moody’s rates the bonds A1 and S&P Global Ratings rates the bonds A.
The state appropriation isn't pledged as a security of the bonds and the state isn’t obligated to reimburse the school. “A material deterioration of support from the State of Indiana would pressure the university's credit quality,” Moody’s said.
Total support from the state has remained relatively flat in recent years, totaling $55 million in fiscal 2018, but still accounts for approximately 34% of USI’s operating revenue. “The school is budgeting for a 3% increase in appropriations in fiscal 2019 and expects a slight uptick in fiscal 2020, primarily due to increased revenue from student fee bonds debt service reimbursements,” Moody’s said.
Stifel is senior manager and Piper Jaffray is co-manager. Blue Rose Capital Advisors LLC is the municipal advisor. Ice Miller LLP is bond counsel.
The school has grappled with enrollment decline in the last five years, similar to other Midwest universities. In the fall of 2016 full time enrollment declined modestly to 8,154 from 8,235 in fall 2017. In the last five years enrollment was down roughly 2.5% since fall 2014.
Net tuition per student increased in fiscal 2018 by 6.7%, after declining in fiscal 2017. This increase was driven by a tuition increase in fall 2017 of nearly 5% for in-state students. Tuition was increased by a similar amount in fall 2018.
