$150 million bond issue attracts wide interest

Jul 10, 2003, vol. 27, no. 6
By Diane Luckow

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SFU's recent $150 million private placement bond issue attracted record-high buyer interest for a Canadian university bond issue, with institutional investors clamouring for $300 million worth.

“One pension plan wanted to buy the entire issue,” notes SFU treasurer Jim Boyd, who coordinated the complex financial transaction. The bonds went on the market on June 3 and sold out within a half hour.

In all, 26 institutional investors from four provinces bought up the 40-year bonds at a coupon rate of 5.613 per cent interest.

“We're the tenth Canadian university to issue such a bond and the first to have a coupon below six per cent,” says Boyd. “If you put all of these together, we've actually created a new university bond sector totalling $1.5 billion.”

Dominion Bond rating service assigned SFU a AA(L) bond rating -- equivalent to the province of B.C. -- while Moody's Investors Service assigned a Aa3 rating, which is just below the provincial rating.

The high ratings reflect strong student demand, which provides a steady stream of revenue, and successful fundraising and research income streams.

Boyd attributes the quick sale to recent fears of deflation and to SFU's executive team's commitment to the issue. President Michael Stevenson and several others made major presentations to the bond rating agencies and to potential investors.

Proceeds from the bond issue will be used for self-supporting and ancillary capital projects such as two new residence buildings, a parking garage and an athletic building extension. “The debt will be serviced through user pay fees and other non-operating budget revenue streams attached to these projects,” says Pat Hibbitts, VP-finance and administration.

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