The Massachusetts Institute of Technology, which boasts a natural triple-A rating, willprice $150 million in 30-year fixed-rate revenue bonds today through the MassachusettsHealth and Educational Facilities Authority.
Lehman Brothers is senior managing the sale, which is one of the last MIT has planned tofinance its $1 billion, five-year capital plan. Allan Bufferd, the university'streasurer, said the school could be back in the bond market in December with a deal tocomplete the capital plan, which has focused on construction of buildings around theCambridge campus.
"We are essentially finished with our five-year plan," Bufferd said. "This is our fourthyear of consecutively being in the bond market and we are not anticipating much debtafter this issue." The university currently has $930 million in outstanding debt,including commercial paper. Bufferd said the December deal could be for around $50million.
Both Moody's Investors Service and Standard & Poor's affirmed the school's triple-Arating yesterday. Fitch Ratings does not rate the school.
The MIT deal will be followed next week with a $35 million insured revenue bond dealfrom Boston University, which is also selling through MassHEFA. Merrill Lynch & Co. issenior managing BU's deal, which will be fixed-rate. The co-manager is Lehman, which forthe past two years has been the top underwriter for higher education deals inMassachusetts, underwriting 10 issues totaling $902 million last year.
Proceeds are being used to finance the construction of a new graduate student dormitorywith 220 new apartments. A small portion of the proceeds will be used to fund othercampus improvements.
Standard & Poor's last week affirmed the university's BBB-plus rating. Analyst MarcSavaria said that among the current credit concerns are the fact that BU has relativelylow levels of liquidity and a low level of alumni support. He also said that theuniversity's approximately $1 billion in debt outstanding is a significant amount forits current rating.
"At this point [after this sale] if they were going to issue debt without some increasein their financial resources that would be a concern," Savaria said. "Right now they arevery leveraged, and that is keeping them in the triple-B category."
Moody's rates the school a step higher at A3, while Fitch does not rate it.
BU was last in the market in June 2002, when a $250 million negotiated sale was issuedthrough the Massachusetts Development Finance Agency, the state's other conduit issuerfor higher education debt. For the past five years the school has switched betweenMassDevelopment and MassHEFA for its bond sales.
The bonds will be insured by triple-A insurer Financial Guaranty Insurance Co.
