University of California to tap bond market for $1.5 Billion

By Elizabeth Rembert, Bloomberg

The University of California is prepping a $1.5 billion municipal bond sale to foot the bill for various projects at its 10 campuses and six academic health centers, according to Fitch Ratings Inc.

The deal could price as early as next week and includes two tranches of general revenue bonds, one for $825 million and another for $675 million, per the report.

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Fitch assigned the debt an AA rating, the third-highest available, pointing to record-breaking enrollment numbers and a vast research enterprise. UC’s strong enrollment and high student demand give it tailwinds against the challenges facing higher education across the country. A dwindling supply of prospective students and rising expenses have led at least 40 US colleges to shutter, or announced plans to do so, since 2020.

UC’s financial profile remains strong and analysts expect its operating performance will remain healthy. Separately, the Trump administration has demanded $1 billion to unfreeze federal research grants at the University of California at Los Angeles after UCLA was found to have violated federal civil rights laws by failing to stop antisemitic harassment on its campus.

Fitch analysts said that plans to expand the system’s clinical enterprise will boost exposure to Medi-Cal, California’s Medicaid program, but also increase capacity for unmet demand.

A representative for UC didn’t respond to a request for comment.

“UC’s operating performance will remain healthy as it navigates near-term pressures on state funding, certain research grant revenue cuts and through an ongoing and sizable capital improvement plan, which includes addressing remaining seismic needs,” the analysts wrote.

–With assistance from Maxwell Adler.

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