To help finance its 10-year Capital Plan, the University raised $500 million in bonds this June. The sale brought the University’s total debt close to $3 billion.
The plan calls for the construction of new buildings, including “expanding and enhancing computer science, engineering, and environmental studies; development of a new campus across Lake Carnegie from the main campus, as well as updating and expanding the University’s energy, transportation, and technology infrastructure,” according to the official memo on the sale.
The University “anticipates that it will access the capital markets from time to time to provide a portion of the financing,” the memo adds.
The recently-raised bonds were issued through the Trustees of Princeton University, underwritten by J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC, and sold at a 2.516 percent yield. Although the debt sales were in the works prior to market volatility sparked by COVID-19, the sales’ entry point was favorable.
“During May through June the fixed-interest-rates were very low,” Jim Matteo, vice president for finance and treasurer of the University, said in an interview with The Daily Princetonian.
The bonds in this sale are rated AAA by both Moody’s and S&P, which indicates the independent rating agencies have the highest level of confidence that the University can pay them back.
The University’s use of bonds is very similar to a homeowner buying a mortgage, Matteo explained. By issuing long term, 30-year bonds — which will mature in 2050 — the University can benefit from the low interest rates today and spread costs over that period.
Purchasers of these types of bonds generally include large institutionalized asset managers and insurance companies, while a significant minority consists of international buyers, Matteo noted.
The University is not alone in selling new debt this year, and the yield rate on Princeton’s bonds are similar to its peers. In August, Cal State sold around $466 million of taxable bonds. In April, Harvard raised over $1 billion through debt sales at a yield of 2.517 percent. Both institutions will use their bond revenue to pay for capital and corporate expenses, according to Bloomberg News and the Harvard Crimson.
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