ANN ARBOR – As colleges and universities sell bonds to offset mounting debt due to the coronavirus pandemic, the University of Michigan is the latest player to join the trend.
U-M has sold nearly $1 billion in bonds to refinance debt and to pay for construction projects, according to a Bloomberg report. $850 million of the bonds are taxable and were priced at yields from 1% to 2.56%.
With an AAA credit rating, U-M released documents ahead of the sale which revealed it is using the funds to finance construction of three new facilities including an inpatient care center, a parking lot and a transportation maintenance facility. It is also funding the expansion of its engineering lab, refunding existing debt and working to reduce emissions at a power plant.
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So far this year, colleges have issued nearly $23 billion in bonds and are now taking advantage of declining interest rates that have come with recently stabilized markets. According to Bloomberg, the figure is seven times higher than was sold last year.
As uncertainty looms over the upcoming fall semester, experts say elite universities should fare the storm due to their large endowments and high applicant rate. Other smaller schools will struggle, however, with some already announcing permanent closures over losses due to the health crisis.
School officials have said they will announce a formal decision on the fall semester later this month.