Purdue issues bonds as S&P raises rating
WEST LAFAYETTE, Ind. – Purdue University sold more than $169 million in bonds during November, including refinancing almost $54 million in older bonds at a more favorable interest rate.
Also in November, Standard & Poor's raised Purdue's credit rating to AA+, indicating a high level of confidence in the university's ability to meet its financial commitments.
The sale to refinance older bonds will save almost $5.7 million over the life of those bonds. "That's a 9 percent savings for the university. More than $2.7 million of those savings will benefit the state, which provides funding for some of Purdue's debt," said James Almond, senior vice president for business services and assistant treasurer.
Also included in the bond sale: $85 million for construction of the student fitness and wellness center; $16 million for a new parking garage at Indiana University-Purdue University Fort Wayne; and $20 million for building repair and rehabilitation.
Purdue was able to offer the bonds, the last of which will mature in 2035, at an overall 2.89 percent interest rate to the university. In part, the low interest rate is because of the Build America Bonds program, a part of the American Recovery and Reinvestment Act. Tax-exempt agencies can sell taxable bonds with a portion of the interest covered through this legislation.
The S&P rating increase, up from AA, makes Purdue's bonds even more attractive in a time of volatile interest rates. "There is a flight to quality in a time like this, and the AA+ rating makes us a higher quality issuer," said Denise Laussade, director of treasury operation.
Under S&P's ratings, AA means "very strong capacity to meet financial commitments." The highest rating is AAA, "extremely strong capacity to meet financial commitments." The + shows relative standing within a major rating category.
"I am very pleased with how the financing team has actively managed the debt program for cost savings refunding opportunities like this, in addition to securing such a low cost of capital for the construction projects," said Al Diaz, executive vice president for business and finance, treasurer.
Writer: Judith Barra Austin, 765-494-2432, firstname.lastname@example.org
Sources: James Almond, 765-494-9706, email@example.com
Denise Laussade, director of treasury operations, 765-494-9783, firstname.lastname@example.org