Cambridge University issues its first £350m bond

The University of Cambridge announced yesterday the issue of £350 million worth of bonds, at a rate of 3.75% and due in 2052.

The news comes as the University of Cambridge was assigned a triple A rating by Moody's last week. The bonds are expected to be formally issued on 17 October 2012, and were priced at a spread of 60 basis points over the relevant reference gilt.

In a statement, the University affirmed that it aims to "use the net proceeds from the bond for general corporate purposes, including investment in research facilities, accommodation and other university assets".

Vice-Chancellor Sir Leszek Borysiewicz commented: "we are delighted by the success of this issue, and by the strong support shown by investors in the University and its mission. The proceeds will enable us to continue to invest in teaching and research at the highest international levels."

In a 2010 submission to the Lord Browne Review, the Russell Group of 20 leading universities argued that selling bonds – long-term debts issued by companies to raise finance – could provide an alternative way of funding higher education, rather than relying on taxpayers' money via the state.

Cambridge is the latest higher education institution to venture into the markets. Harvard and Princeton, as well as other Ivy League universities in the US, have issued bonds for several years.

De Montford is the only other UK university to enter the capital markets after the Hefce (Higher Education Funding Council for England) gave formal ‘consent' to obtain the bond and investors confirmed the loan in July this year. At the time, DMU said in a statement that £20 million of the £110 million public bond would put towards "transforming the campus and improving the student experience". De Montfort is currently rated Aa1 by Moody's.

Laurence Tidy - Editor

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