DALLAS — The Utah Board of Regents is preparing to issue $518.7 million of taxable notes for its student loan program through RBC Capital Markets.

The notes, which are 97% reinsured by the federal government, are exempt from state income tax but not federal, according to bond counsel Ballard Spahr.

Standard & Poor's rates the notes AA-plus (sf), while Fitch Ratings assigns a structured finance rating of AAAsf.  Fitch has a negative outlook, while S&P's is stable, according to the preliminary official statement.

The notes will pay the variable rate of one-month Libor plus 75 basis points beginning Dec. 26.  Final maturity on the notes is December 2031, although the state expects to pay them off before that.

Standard & Poor's analysis indicates that under moderately stressful economic conditions the rating would not decline more than one rating category in the first year.

The POS cautions that the Libor (London Interbank Offered Rate) used to set the rates is the subject of litigation and was the recent subject of settlements with regulators over manipulation by member banks.  On Sept. 28, a top official at the United Kingdom's Financial Services Authority called for a sweeping overhaul of Libor and removing it from control of the British Bankers' Association.

"The Board (of regents for Utah) cannot predict what effect, if any, these events will have on the use of Libor as a global benchmark going forward, or on the notes," the POS states.

The Utah Board of Regents, created in 1969, oversees eight public colleges and universities that include two major research/teaching universities, three metropolitan/regional universities, one state college and two community colleges.


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