DALLAS — Indiana State University heads into the market Wednesday with an $82 million issue, a portion of which will fund renovations to its health and human service building.
Bond proceeds will finance the entire $64 million cost of the College of Health and Human Services renovation and expansion project. It is the largest state-funded project in the history of the Terre Haute-based university.
Moody's Investors Service rates the student fee revenue bonds A1 and gave the credit a boost by raising its outlook to positive from stable. Fitch Ratings assigns its AA-minus to the credit and a stable outlook.
Moody's and Fitch also affirmed the same ratings on $61 million of outstanding student fee revenue bonds and on $88 million of exiting housing and dining system revenue bonds.
The outlook change was due to strong overall debt service coverage with ongoing, uninterrupted fee replacement for debt service coming from the state.
"The state of Indiana continues its support of capital projects on ISU's campus through additional fee replacement appropriations for debt service," Moody's said.
Barclays and Citigroup are the lead managers. Ice Miller LLP is bond counsel and Blue Rose Capital Advisor serves as municipal advisor to ISU.
ISU broke ground on the renovations to its health and human service building in July 2016 and it is scheduled to be completed in March 2019.
The project will modernize and expand the former Arena Building, built in 1961 with an addition in 1986. The health college has been adding programs in recent years and has more than 3,400 students, both undergraduate and graduate, enrolled this fall.
The expansion will house new academic programs as well as existing programs now housed elsewhere on campus. For the existing facility, upgrades will improve temperature control and air quality and add technology improvements; space will be reconfigured.
The remaining proceeds will refund outstanding debt for savings. "ISU expects a net present value savings of approximately $4.2 million," said university treasurer Diann McKee in an e-mail.
Indiana's fiscal 2016 and 2017 biennium budget provides ISU capital bonding authority for $64 million to renovate the health and human services building, a project which is eligible for full fee replacement beginning in fiscal 2017.
The state budget also provides a $37.5 million appropriation to support a $75 million renovation and expansion of the Hulman Center, ISU's events arena. The university is expected to return to market in 2017 to fund that project. Approximately half of the estimated $75 million project will be funded through fee replacement appropriations. The other half is expected to come from local partners.
ISU has generated strong operating performance during a sustained period of enrollment growth. The university enrolled 11,577 full time students in fall 2015, a 2.7% increase over fall 2014 and a 19% increase since fall 2011, according to Moody's.
However, Moody's is concerned that current and future borrowing plans will reduce coverage without an increase in reserves, which may potentially impact the rating level of additional debt. "The university has some additional debt capacity at this rating level, but we will evaluate new debt as it is added," said Moody's.
"Indiana State University follows conservative budget practices along with tight expense management," said McKee. "Future borrowing will be limited, especially in the near-term."
