The University System of Maryland (USM) has successfully completed the sale of $120 million in USM Auxiliary Facility and Tuition Revenue Bonds comprised of two distinct series. The sale was preceded by very high ratings from the three leading bond ratings houses.
The two series, 2010 Series A (Tax-Exempt Bonds) and 2010 Series B (Taxable Build America Bonds), were issued to fund new construction projects. All of the 2010 Series bonds received the high ratings of Aa2, AA+, and AA from Moody’s Investor Service, Standard & Poor’s and Fitch Ratings, respectively.
The True Interest Cost (TIC) to the USM was 3.157 percent, lowest in USM history. The TIC reflects the actual cost of issuing a bond when accounting for the present value of money. A lower TIC represents a cost savings to the institution issuing a bond in interest owed bondholders.
According to Moody’s Investor Service, USM’s bond rating reflected “positive operating margins and well-diversified revenue base” and “its track record of positive operating performance… and maintaining a continued focus on cost-containment measures.”
Standard & Poor’s ratings analysis reflected positively on USM’s “solid enrollment and demand” (148,676 in fall 2009, up 3.6 percent from the previous academic year), “good revenue diversity,” and “manageable debt burden.”
A report of the USM Auxiliary Facility and Tuition Revenue Bonds Financial Advisory Memo, inclusive of the ratings reports, is included here.
“We are indeed proud to receive these strong ratings and complete the sale of this bond issue so efficiently,” said USM Chancellor William E. “Brit” Kirwan. “The USM places a high value on sound fiscal stewardship and its role in fueling teaching, learning, and research for the new economy.”
Joseph Vivona, USM’s vice chancellor of administration and finance and chief operating officer, said the USM is pleased to continue receiving such strong debt ratings, especially in this challenging economic climate.
“These strong ratings offer two advantages. First, the System experiences a lower cost of issuing future debt. Second, it helps foster a more seamless partnership with the private sector as the USM explores future public-private partnerships in the construction of student housing, research buildings, and better parking,” Vivona said.