University of Arizona sets first bond sale after negative rating outlooks
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The University of Arizona heads to the municipal bond market this week with its first bond issue since financial troubles led to negative rating outlooks from Moody’s Ratings and S&P Global Ratings.
The $115.645 million of Stimulus Plan for Economic and Educational Development, or SPEED, revenue bonds issued through the Arizona Board of Regents will refund debt the Tucson-based university issued in 2013 and 2014.
Rating outlooks
The preliminary official statement for the refunding said the federal agency has not yet sent the university or its global campus entity “a requisite recoupment notice.”
Continued integration risk associated with University of Arizona Global Campus would further narrow the university’s already thin liquidity, Moody’s said.
The university has $935 million of outstanding debt secured by a first lien on its system revenue, according to the POS. Following the refunding, outstanding subordinate SPEED debt will total nearly $272 million.
Its
The university’s
The university, which was established in 1885 as Arizona’s only land grant institution, enrolled more than 53,000 students last fall.
Revenue has increased 55% over the last five years, driven in part by non-resident tuition, as out-of-state students increased from 41.5% of total headcount in fall 2019 to 51.2% in fall 2023, according to an investor presentation for the refunding issue. State funding accounted for 17% to 19% of the university’s unrestricted current operating funds in fiscal 2019 through 2023.
Debt service on SPEED bonds is paid with certain state lottery and university revenue and secured by a subordinate pledge of gross university revenue.
The refunding, scheduled to price on Wednesday, is structured with serial maturities from 2025 through 2044, according to the POS.
“SPEED Bonds are serviced 80% by Arizona State Lottery funds and 20% by the university, so most savings accrue to the lottery funds,” Zak said. “Current estimates, subject to pricing, are $16M (net present value) savings.”
Morgan Stanley leads the underwriting team of BofA Securities, Goldman Sachs, and JP Morgan. The bond counsel is Squire Patton Boggs and the financial advisor is RBC Capital Markets.
