The Trustees of Purdue University sold $72.5 million in bonds to refund previously issued securities.
The bonds mature between 2024 and 2035, yielding between 2.61% and 3.25%. They pay interest at 5%. The securities received a rating of Aaa from Moody’s Investors Service and AAA from S&P Global Ratings.
The rating reflects Purdue’s “excellent brand” and its “robust and growing research enterprise with strong national demand for its science, technology, and engineering oriented programs,” Moody’s analysts wrote.
The bond proceeds will refund securities the university issued in 2010 using an Obama-era provision that encouraged infrastructure construction in the aftermath of the 2008 financial crisis. That provision included a 35% federal subsidy on interest expenses, which was rolled back in 2013. Purdue argues that the cut constitutes an “extraordinary event” that makes the refunding legally viable.
The Series 2010 bonds pay a higher yield than the Series 2024 bonds replacing them, so investors are set to take losses.
Other schools that have called on the “extraordinary event” provision to refund so-called Build America Bonds have drawn investor ire. Last month, a group of bondholders threatened legal action against the University of California for its own refinancing of Build America Bonds.
It remains to be seen whether something similar will occur at Purdue, which is governed by its board of trustees. The 2024 bonds are limited obligations of the trustees corporation, payable by student fees.
Jefferies LLC served as lead underwriter on the issuance, purchasing the bonds for $81.4 million. The price reflected a premium of $9 million. Blue Rose Capital Advisors, LLC acted as financial advisor.