University of California bond sale evaporates amid federal funding threats

It appears the Regents of the University of California has pulled a $1.5 billion revenue bond deal slated to price Tuesday as it battles Trump administration efforts to cancel University of California, Los Angeles research grants.

Jefferies and Bank of America were listed as lead managers on the deal planned for Aug. 19 that has since disappeared from its investor website.

No disclosure filing explaining why the deal has been pulled or delayed had posted to the Municipal Securities Rulemaking Board’s web site as of deadline.

Stett Holbrook, a university spokesman declined to comment.

UC’s general revenue bonds carry ratings of Aa2 from Moody’s Ratings and AA from both S&P Global Ratings and Fitch Ratings. All affirmed stable outlooks ahead of the deal.

The university was expected to price $825 million in general revenue bonds 2025 Series CD and $675 million general revenue bonds 2025 Series CE. The fixed rate and tax-exempt debt would have paid for campus and medical center projects and paid the costs of issuance, Fitch analysts said in a Monday report.

“It was clearly pulled, because of the lawsuit with Trump,” said a broker-dealer, who asked not to be named.
The Trump administration suspended $584 million in grants to UCLA earlier this month and then on Aug. 8 demanded a $1 billion settlement.

Trump targeted east coast schools earlier this year claiming those universities failed to protect Jewish students during violent anti-Semitic pro-Palestine demonstrations fueled by the war between Israel and Hamas. He also has threatened university research there and in California over claims of anti-Semitism, the illegal use of race in admissions and for policies that allow transgender athletes to compete according to their gender identity.

“The predicament is if Trump pulled the funding and there is litigation with him, what is the disclosure going to say,” the source said. “It’s not that they couldn’t come up with the proper level of disclosure, but it’s my guess, they are working on what they are going to say to the market.”

While Harvard sold debt even as it battled Trump, the move to take away UC’s funding “came on very suddenly, while the finance team was working on the deal,” they said.

Yields on Harvard’s bonds widened as it faced threats to its funding from the Trump administration.

“I think they are facing pressure, but UC enrollment is very strong,” said Chris Brigati, managing director and chief investment officer of SWBC.

It’s hard to compare the mammoth California public university system to the uniqueness of Harvard, a private university with a sizable endowment, sources said.

Brigati said he hasn’t noticed a differential in pricing on UC’s bonds at this point. “There has been a widening of university credits broadly, but I don’t know if UC has struggled with that specifically.”

California Gov. Gavin Newsom had said the state would sue to protect the funding.