DALLAS - The University of Oklahoma's redesign of its football stadium in Norman will take the lion's share of proceeds from a $245 million issue of taxable and tax-exempt bonds going the market this week, officials said.
The bonds come with downgrades from Standard & Poor's and Fitch Ratings. S&P lowered the university's debt to A-plus from AA-minus, while Fitch dropped the bonds to AA-minus from AA. Outlooks are stable.
"We lowered the rating because we believe that OU's financial resources were low for its prior rating," said Standard & Poor's credit analyst Ken Rodgers. "Although we view further negative rating action as unlikely, credit factors that could lead to negative actions include significant enrollment decline, unanticipated operating deficits on a full-accrual basis, or additional debt issuance without a commensurate increase in financial resources."
Fitch noted that OU's maximum annual debt service grows to 9.9% of fiscal 2014 revenues with this issue.
The two series of revenue bonds are pricing through negotiation with RBC Capital Markets, with retail orders coming Sept. 9 and institutional the following day, according to State Bond Advisor James Joseph.
Jon Mollenberg, managing director at RBC, is lead banker on the deal. Co-managers are BOSC Inc., Stifel and Wells Fargo Securities.
Kelsi Spurgeon, principal at Columbia Capital Management, is financial advisor.
"This is the largest transaction OU has ever done," Spurgeon said.
In a roadshow for investors, OU chief financial officer Chris Kuwitzky emphasized the university's stability.
"We have a sound and stable management team, led by former Gov. David Boren, who is now in his 21st year as president of the university," Kuwitzky said. "We also have very stable enrollment and a very conservative debt policy."
The bonds will be issued through the Oklahoma Capitol Improvement Authority as $196.9 million of tax-exempt Series C and $42.2 million of taxable Series D.
OU will use $117 million for redevelopment of the south end of Gaylord Family-Memorial Stadium at the main campus in Norman, Okla.
Donations from the Gaylord Family Foundation and others will be added to the bond proceeds to finance the $160 million stadium project, officials said.
Boren said the project will require no state appropriated funds and that no tuition would be applied.
"It is appropriately scaled to reflect the uncertainty of economic conditions caused by low oil and gas prices," Boren said.
About $80 million of the proceeds will go toward OU's new residential colleges - living and dining facilities designed to also serve as classroom space.
A new parking structure will require about $28 million of the proceeds, according to Kuwitzky.
"These residential colleges will have a huge imprint on the campus and will help build the bonds of community," Boren said in announcing the concept for upperclass members. "Now mainly freshmen live on campus. This new option will be available to sophomores, juniors and seniors."
The residential college concept was created at Oxford University and Cambridge University in the United Kingdom and has proven successful at colleges and universities in the United States, officials said. OU is the first university in the state and Big 12 and one of the first public universities to adopt the model.
The colleges will have their own dining rooms, study areas and intramural teams, crests and mottos. Ten faculty fellows will have offices in the colleges and seminar rooms will also be included. Parking will be located nearby.
Established in 1893 before Oklahoma became a state, OU enrolled 27,278 students in fall 2014. Students enroll in 16 colleges on a 3,500-acre campus in Norman.
