The governing body of the University of California issued $1.68 billion in bonds to finance capital improvements.
The regents of the university system sold the bonds in three series. The Series BW bonds, consisting of $934.5 million, mature between 2025 and 2054, yielding between 2.83% and 3.72%; the Series BX bonds, consisting of $498.7 million, mature between 2026 and 2031, yielding between 2.83% and 2.91%; and the Series BY bonds, consisting of $250 million, mature in 2054 and pay interest at a variable weekly rate.
The Series BW and Series BX bonds pay interest at 5%. They received a rating of AA from Fitch Ratings, Aa2 from Moody’s Investors Service, and AA from S&P Global Ratings. The Series BY bonds received a rating of AA/F1+ from Fitch, Aa2/VMIG 1 from Moody’s, and AA/A-1+ from S&P.
The rating reflects the university system’s “growing enrollment and very strong student demand characteristics, solid international reputation, steady operating performance inclusive of a sizable and accretive health system, generally steady support from the State of California (IDR AA/Stable) and expectations of flexibility and manageable leverage through a sizable capital improvement program,” Fitch analysts wrote.
The issuance is the latest by the University of California system, which has sold billions of dollars worth of bonds this year, including a $1.1 billion issuance in March and a $1.4 billion issuance in January.
In March, a group of investors challenged the system’s recent bond sales, arguing that the issuances lacked a legal basis. The university rejects those claims.
The system will use the proceeds from the most recent issuance to fund capital projects. The bonds are limited obligations of the system’s governing body, payable by general revenues.
RBC Capital Markets, LLC and Morgan Stanley & Co LLC served as lead underwriters on the issuance. PFM Financial Advisors LLC acted as municipal advisor.