THE UNIVERSITY of Manchester yesterday became the latest UK university to tap the bond markets for cash, raising £300m in an issue four times oversubscribed.
The institution, part of the elite Russell Group of red-brick universities, borrowed the cash to fund its £1bn campus regeneration.
The bonds were rated Aa1 by rating agency Moody’s and sold on a yield of 4.25 per cent, much lower than the rate at which many Eurozone countries are forced to borrow.
Moody’s said the university’s size – it has 36,000 students – as well as the “high likelihood of extraordinary support from the UK government” in the event of financial troubles, determined the rating.
“The proceeds will allow us to further our ambition to be a truly world-class university,” said professor Dame Nancy Rothwell.
The bonds, which are due to be paid back in 2053, were priced at an 80 percentage point spread over UK gilt yields.
It follows a week-long roadshow to investors in Edinburgh, Manchester and London to institutional investors, with UK fund managers snapping up most of the paper. The sale comes amid a new trend for age old university institutions borrowing money from the markets.
Manchester follows other institutions like the University of Cambridge in tapping markets.
The University of Cambridge was rated AAA by Moody’s last October when it issued a 40-year bond paying 3.75 per cent to raise £350m – higher than the UK government’s rating. And it was not the first time it had dabbled in the markets – King’s College endowment fund was led by college bursar Baron John Maynard Keynes for many years.
ADVISERS UNI OF MANCHESTER BOND ISSUE
University of Manchester drew on the services of Rothschild’s well-respected North West office, based in its own city of Manchester, as well as some of the biggest corporate names in the city for its broking mandate.
Rothschild was taken on board to offer advice on the universities bond issue, through its debt advisory business.
Leading the team was Guy Bagshaw, who is assistant director at the company and head of its debt advisory business in the Manchester office.
Bagshaw previously worked in audit for KPMG in early 2000 before moving into the corporate finance world with a position at PricewaterhouseCoopers. He joined Rothschild in 2005. He holds a degree in engineering from the University of Nottingham.
Rothschild’s small office in Manchester has been a fixture in the centre of the north west capital since 1964.
Last year the office, which is headed by managing partner Richard Bailey, completed 19 corporate finance and debt advisory deals with a value of over £3bn.
Running the book as joint lead managers on the £300m offering were Barclays, HSBC, and the Royal Bank of Scotland, with Linklaters acting as their legal adviser.
They were part of a roadshow across the UK in a bid to whet investors’ appetite for the offering. The offering eventually came in at four times oversubscribed.
Law firms Mills & Reeve and Clifford Chance acted as legal advisers to the university. Also on the ticket as co-manager of the bond issue was the National Australia Bank.