Bank of England considers buying University’s debt

Khushali Dodhia 19 December 2016

A University of Cambridge bond worth £350 million has been added to a list of debt that the Bank of England is prepared to buy in its latest round of quantitative easing.

Policymakers have decided to pump an extra £435 billion into the UK economy by buying up bonds – debt which helps organisations boost their funding efforts – from institutions including the universities of Cardiff, Manchester, and Liverpool.

The debts of companies like BP, Rolls Royce, and Vodafone are also on the list.

To qualify for the purchasing scheme, an organisation must be classed as “making a material contribution to the UK economy”.

The move to include university bonds in this round of quantitative easing effectively means that the Bank is indirectly funding higher education.

Cambridge’s debt comprises the biggest slice of the £1.2 billion of university debt the Bank is considering purchasing.

Its bond was issued four years ago with a fixed interest rate of 3.75% and a maturity date of 2052.

The University purchased the bond a week after being given an AAA rating by credit agency Moody’s, currently a higher rating than the British state’s.

The method of raising money through bonds is a relatively new one for universities, pioneered by US Ivy League schools.

Cambridge’s 2012 bond was its first, although the idea was first practiced in Britain by Lancaster University in 1995.

Since 2012, 18 Cambridge colleges including Christ’s, King’s, and Trinity have used bonds to raise a total of £150 million to fund various college projects. Each individual college has borrowed between £3 and £18 million.