Headline June21, 2014



FACING government funding cuts and sharp spending increases,  some British universities are turning to a new source of money  -the bond market.

English universities and colleges in particular are set to raise their infrastructure spending to  3.86 billion pounds,  or  $6.5 billion  in  2012-13,  the Higher Education Funding Council  for  England:

The public sector paymaster for the sector,  said last month. They plan to invest £3.3 billion a year for the next three years to improve their facilities.

To help cover the costs, they plan to borrow £560 million in the current academic year, raising their total debt to £6.83 billion by July 31, equivalent to 27 percent of their combined total income, the council reported.

Universities have been borrowing from their banks   ''for quite some time,'' Elizabeth Bergman, assistant vice president at Moody's rating agency's global higher education team, said in an interview. What's new is that they are tapping the capital markets with public bond issues.

''That has been driven by two things: charged bank lending standards and a significant reduction in government grants,'' she said. ''The terms, when borrowing from the banks, have been less attractive than in the past and that has encouraged universities to consider the capital markets.''

Ms. Bergman said British universities borrowers first tested the markets about 15 years ago, Issues have remained rare, but in the past couple of years the pace has quickened. In 2012, Moody's awarded an Aa1 rating to a £120 million, 30-year bond issue by De Montfort University, in Leicester, and an Aaa rating for a £350 million, a  40 year issue by Cambridge University 

Last year Manchester University received an Aa1 rating for a £350 million, 40-year issue. 

Manchester turned to the market to help finance a £1 billion loan,  10-year capital investment plan, including the construction of a new engineering and physical sciences campus, said Steve Mole, the university's finance director.

Because of the change in funding that's taken place over the last few years, we no longer get significant capital funding through  H.E.F.C.E.,'' he said. Also, ''most of the bank borrowing that universities traditionally have used-

Tends to be over much shorter term now. Bank's aren't lending over 30 to 40 years
 very much, they're lending over five years, three years.''

Conditions were right for a bond issue, Mr Mole said :  ''There's a massive demand out there for this type of paper.''  The bond, paying a 4.25 percent interest rate was oversubscribed four times.

''Looking back in a few years' time, I would expect  4.25 percent will be seen to be a very good rate,'' he said.

Susan Fitzgerald, senior vice president of the  Moody's team, said British universities were following a trail blazed by United States institutions. ''This evolution is one that we are not only seeing here,'' she said:

We currently rate over $225 billion of debt for colleges and universities, much of that in the U.S.''

The Honour and Serving of the Post continues. Thank you for reading and don't miss the following one:

With respectful dedication to all the Leaders of the Developing World. Here, -Your Excellencies, is an education and capital funding model that you must study and consider. 

With respectful dedication to the Students, Professors and Teachers of Britain. See Ya all on !WOW!  -the World Students Society Computers-Internet-Wireless:

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