Tufts University on March 22 sold $250 million of century bonds to 24 different buyers at an interest rate of 5.017 percent to help fund deferred maintenance projects, according to Executive Vice President Patricia Campbell.
Century bonds are a type of taxable revenue bond that will mature in 100 years.
Campbell said that the administration was initially interested in this opportunity because of the unique chance to sell bonds at this low rate and the recent success of a number of other universities' successful completions of bond-selling, including Northwestern University, Massachusetts Institute of Technology (MIT) and the University of Southern California.
The administration began researching how to offer these bonds last summer, according to Campbell.
"Tufts first started to investigate the possibility of a century bond when we learned that MIT had successfully issued one last May," Campbell said. "Our Board of Trustees encouraged us to consider this possibility."
According to Campbell, century bond rates are at historically low levels due to the current state of the U.S. and global economy and bond market.
Campbell said that proceeds will be allocated to maintenance projects on the Medford/Somerville, Boston and Grafton campuses.
"This and other resources available to Tufts will fund the university's capital expenditures for the next five years," she said.
"We have known needs, such as extensive deferred maintenance needs to refurbish buildings, envelopes, roofs and mechanical systems. We also have known technology needs such as the Student Information System replacement and a Research Administration system."
Campbell said that some proceeds might be used toward advancements in the science and engineering areas, although these changes are still in the planning stages.
"All of our schools in Boston, [Medford/Somerville] and Grafton engage in annual five-year capital planning to renovate and create new space to meet our changing academic needs," Campbell said. "While we are still in the planning process, the bond issue will be used to support the priorities identified in these five-year capital plans."
Campbell said some projects, particularly those concerning deferred maintenance projects, will begin this summer.
"The ability to issue these bonds is a testament to Tufts' strong academic reputation and sound financial management," Campbell said. "Tufts is proud to be able to take advantage of historically low interest rates and lock in that rate in for a very long time as a hedge against inflation."
The administration sought the advice of underwriters in how the university's credit ranking would be affected by issuing these bonds, and underwriters confirmed that the university's credit ranking would not change, according to Campbell.
Campbell said that, with the help of the underwriters, the administration brought the issue to the market to find buyers' actual purchasing price. Individuals who purchase the century bonds are typically insurers, pension funds or other large institutional investors, according to Campbell.
"The Tufts finance staff engaged outside advice from Barclays Capital and J.P. Morgan who assisted us in assessing the market for this financing," Campbell said. "Subsequently, we learned that Tufts could issue $250 million in 100-year bonds and retain our current credit ratings of AA2 by Moody's and AA- by Standard and Poor's. These bonds have a 100-year maturity with the principal due in 2112. Interest payments are made semi-annually for the life of the bonds."
