The University of Texas system issued over $375 million worth of bonds. Proceeds from the bonds will finance refunds on obligations of the system’s board of regents.
The series 2023A bonds, issued by the board of regents of the University of Texas system, will be secured by investment income from the system’s Permanent University Fund. The bonds will mature between 2032 and 2052, with yields between 2.76% and 4.27%.
A portion of the bonds will be used to refund $176 million of outstanding bond issuance to realize a present value savings on that issuance. The bonds received a rating of AAA from Fitch Ratings and S&P Global Ratings. They received a rating of Aaa from Moody’s Investors Service.
“Credit risks are minimal due to Texas state constitutional debt limits and resulting strong debt service coverage,” according to Fitch.
The bond issuance comes amid a surge in enrollment at academic institutions within the University of Texas system. In 2022, The flagship University of Texas at Austin enrolled its largest-ever student body at 52,384. The previous high was set in 2002. Meanwhile, four-year graduation rates have also risen to all-time highs, reaching 73.5% in 2022, up from slightly over 50% a decade prior.
The University of Texas system consists of 13 state-supported universities. The Permanent University Fund consists of a portfolio of investments worth about $28 billion, not including over 2 million acres of land in North and West Texas.
The board currently has $2.5 billion in bonds outstanding that are secured by the Permanent University Fund. The most recent of these bonds were issued in 2022.
The board of regents is the governing body for the University of Texas system. It is composed of nine gubernatorial appointees who serve six-year terms.
RBC Capital Markets LLC served as lead underwriter for the bond issuance. The underwriters purchased the bonds for over $420 million, representing a premium of nearly $46 million over par.