Tuesday 21 November 2017

Cambridge £350m bond rated better than the UK by agency

Cambridge University is to issue its first bond to invest up to £350m in research, accommodation and other assets.
Cambridge University is to issue its first bond to invest up to £350m in research, accommodation and other assets.
Thomas Molloy

Thomas Molloy

CAMBRIDGE University will issue a bond for the first time in its 800-year history after receiving a better credit rating than the UK government from Moody's late last week.

The English university opened books yesterday on a 40-year, £350m (€435m) bond, which is expected to price around 65 basis points over UK bonds.

Last week, Cambridge won a triple-A rating from Moody's with a stable outlook, making it a better risk than the UK government, which is triple-A but with a negative outlook.

The credit agency said the rating reflected Cambridge's "outstanding market position, significant amount of liquid assets and strong governance structure".

Irish universities have never issued bonds but some British universities went to the bond markets in the late 1990s and De Montfort University in Leicester issued a bond earlier this year.

Cambridge has been authorised to borrow as much as £350m, Moody's said in its report, citing the university's "extraordinarily strong market position", stable revenues and ability to fund capital spending.

While top US universities, including Stanford and Columbia, have access to bonds markets to supplement income from endowments, leading UK universities typically have less cash than their American peers and rely on revenue from publishing, examinations, research grants, fees and government grants.

Cambridge, which educated Isaac Newton and Charles Stewart Parnell, has its £1.6bn Cambridge University Endowment Fund, which it can draw for a long-term rate of about 4.5pc a year.

Cambridge plans to invest in accommodation, research facilities and other assets.

The only debt the university has is a £6.2m loan from Barclays, and it recently raised nearly £1.2bn during its 800th anniversary campaign.

The bond is technically being issued by "The Chancellor, Masters, and Scholars of the University of Cambridge".

Morgan Stanley is a joint lead manager of this offering, along with HSBC and Royal Bank of Scotland.

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