Western Michigan University Eyes $68M Offering

CHICAGO — The Board of Trustees of Western Michigan University, one of the state’s largest colleges, is expected to enter the market by the end of May with $68 million of mostly new-money debt.

Proceeds will be used to finance three capital projects as well as refund $15.6 million of outstanding 2001 bonds.

The borrowing will push the single-A rated university’s outstanding debt to $314 million. All of its debt is in fixed-rate mode.

For the year ended June 30, 2010, WMU’s $369.5 million of revenue provided maximum annual debt-service coverage of 13.62 times, according to bond documents.

The board approved the issue last month.

Officials originally planned to issue $88 million, but trimmed the size after the Michigan Legislature authorized an appropriation of $18 million on behalf of the school, the university said.

WMU is one of Michigan’s 15 public universities, and like the others, relies heavily on state appropriations. State aid makes up nearly 25% of the university’s revenue and is its second-largest revenue source behind student fees.

That reliance could mean the university will face challenges as the state grapples with its own fiscal problems, which have led to cuts in its higher education budget.

State aid to its public universities dropped to $1.6 billion from $1.9 billion in 2002.

Lawmakers Thursday were in the final throes of crafting a 2012 budget, with expectations of a higher education budget that features cuts as high as 15% across the board.

WMU has worked to offset state aid cuts by increasing tuition and cutting spending and will consider similar action in the future, according to bond documents.

The university does not expect to issue additional debt this year.

WMU’s issue includes serial bonds maturing from 2012 through 2026 and three sets of term bonds that mature in 2031, 2036, and 2040.

The school is expected to enter the market the week of May 30.

Morgan Stanley and Stifel Nicolaus are underwriters. Miller, Canfield, Paddock and Stone PLC is bond counsel and Public Financial Management is financial adviser.

The bonds are secured by a pledge of the school’s general revenues.

Standard & Poor’s rates Western Michigan University A and Moody’s Investors Service rates the credit A1.

WMU’s enrollment in the fall of 2010 reached 25,045. That is up 1.9% from 2009, when enrollment declined slightly following automaker bankruptcies.

School officials said they expect ­enrollment to increase again next year and that they have an annual growth goal of 1%.

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