Sale of Taxable Bonds Will Help Fund Renovation of Neilson Library, Other Capital Projects

On Tuesday, June 23, Smith College sold $192 million in Series 2015 Taxable Bonds. The proceeds from these bonds will be used to fund major projects in the college’s capital plan—including the re-imagining and redesign of Neilson Library—and to restructure $91 million of existing debt at a lower rate.

Bond financing is a type of long-term borrowing frequently used by colleges and universities to raise funds for long-term infrastructure investments. Investors purchase the bonds from the issuer (in this case Smith College), which commits to make periodic interest payments and repay the original principal on a certain date. Investors typically include institutional and retail investment managers, insurers and individuals.

“Bond financing is a longstanding and effective method of financing the college’s major capital projects, said Michael Howard, Smith’s vice president for finance and administration. “With this issuance and restructuring, we are able to secure the new funds needed for the Neilson project with minimal impact to our annual operating budget.”

The new issuance includes $40 million maturing in 2035 at a 4.47 percent fixed rate and $152 million maturing in 2045 at a 4.62 percent fixed rate. This structure allows the college to fund new projects at a historically low cost of capital while also minimizing the risk of rising interest rates.

The bonds were rated Aa1 and AA+ by independent credit agencies Moody’s and Standard & Poor’s, respectively. The college’s significant financial resources, strong operating results and established position as a highly selective women’s liberal arts college supported these high quality ratings.

The Series 2015 bonds are unsecured general obligations of the college. Barclays Capital was the lead investment bank, with J.P. Morgan and Morgan Stanley also participating.