DALLAS – Officials at Indiana's Purdue University hope that its newly minted, second triple-A rating will spell savings on its upcoming bond sale.
Standard & Poor's upgraded the university's rating to AAA from AA-plus earlier this month.
The West Lafayette-based university has held Moody's Investors Service's Aaa rating since 2010 and the rating agency affirmed it this week.
S&P's upgrade reflects Purdue's strong enterprise profile, financial strength and manageable debt position along with Purdue's co-flagship position in Indiana's public higher educational system.
Continuing state operating support, strong operating results, and successful fundraising record also boost the university, according to the rating agency.
The upgrade puts Purdue in the ranks of just five U.S. universities to have dual triple-A ratings.
Purdue is planning to sell $144 million of debt in the second quarter of 2016, said James Almond, senior vice president and assistant treasurer at Purdue.
"We anticipate that the dual ratings will bring a savings of three to five basis points," he said. "On a $50 million issue, as an example, five basis points over a 20-year period could generate just under $300,000 in savings through the life of the bond issue."
Purdue will sell two series of bonds, with an A series offering $56 million of student facilities system revenue bonds that will include a $24 million refunding. The new money will fund construction of the university's engineering flexible laboratory.
The student facilities system revenue bonds are secured by pledged revenues that include a first lien on auxiliary system net income and other available university funds, excluding mandatory student fees and state appropriated funds. There is no debt service reserve fund.
Morgan Stanley is the senior manager and Barnes & Thornburg is bond counsel.
The Series CC for $88 million of student fee bonds will include a $57 million refunding with the remainder as new money that will fund the construction of the university's agricultural and life sciences facility.
The student fee bonds are payable from and secured by a pledge and first lien on student fees, which include nearly all academic fees, including tuition, and certain other pledged revenues. There is no debt service reserve fund. Bond covenants require a ratio of at least 1 times annual debt service on the student fee bonds.
Barclays is the senior manager and Ice Miller LLP is bond counsel.
The financial advisor on both sales is Blue Rose Capital Advisors.
Almond said that both projects are progressing through the construction and design process and the university will announce bids and awards towards the first part of March. The bonds will be issued shortly thereafter.
Purdue University is Indiana's land grant university and one of its two flagship universities, as well as a member of the Big Ten athletic conference. The university has four campuses, including its main West Lafayette campus and three regional campuses, two of which are currently undergoing administrative consolidation.
The university is large with a nearly 69,000 headcount, which does not include over 6,000 students at Indiana University-Purdue University Indianapolis, over which Indiana University has fiscal responsibility.
