The governing body of the University of California (UC) system issued $1.4 billion in bonds to make capital improvements and refund previously issued securities.
The Regents of the University of California sold the bonds in three series. The tax-exempt 2024 Series BS bonds, consisting of $1.05 billion, mature between 2024 and 2044, yielding between 2.4% and 3.46%. The tax-exempt 2024 Series BT bonds, consisting of $200.4 million, mature on May 15, 2026, and yield 2.76%. The taxable 2024 Series BU bonds, consisting of $144 million, mature on May 15, 2034, and pay interest at 4.932%. The securities received a rating of Aa2 from Moody’s Investors Service, AA from S&P Global Ratings, and AA from Fitch Ratings.
The rating “reflects the UC system’s growing enrollment and very strong student demand characteristics, consistently solid national/international reputation, steady operating performance inclusive of a sizeable and accretive health system, continued support from the state of California (IDR, AA/Stable) and expectations of financial flexibility and manageable leverage as UC navigates its sizable capital improvement program,” Fitch analysts wrote.
The issuance comes amid increasing enrollment and revenue across the UC system. Across its ten campuses, enrollment has climbed from 279,145 students in 2018-19 to 289,696 in 2022-23, according to the official statement accompanying the sale of the bonds. That increase has contributed to a rise in revenue. During the same period, UC revenue increased from $17.8 billion to $21.2 billion, according to the bond documents.
UC plans to use that revenue to make a variety of upgrades. The system’s capital plan calls for more than $30 billion in spending through 2029, with many improvements financed by bonds like the Series 2024 issuance. The Series 2024 proceeds will also refund bonds the regents sold in 2014.
The bonds are limited obligations of the regents, payable by UC revenue.
Jefferies LLC served as lead underwriter on the issuance, purchasing the bonds for $1.57 billion. The price reflected a premium of $174 million. PFM Financial Advisors LLC acted as municipal advisor.