Northwestern warned investors in bond documents for its most recent offering that potential federal and executive actions could have a “material” impact on the school, including its ability to sell tax-exempt bonds. Colgate, a liberal arts school in New York, and Earlham College, a wealthy school in Indiana, nodded to a similar risk in their respective bond documents.
With tax threats looming, some colleges are employing borrowing techniques that will help mitigate this risk. Harvard this month raised $434 million by selling tax-exempt bonds. A portion of the debt matures in 2055, but features a mandatory “put” in 2032 — signaling the school will buy back the bonds at the earlier date seven years from now. As a result, the offering — with proceeds to be used in part to finance projects like the renovation of its distinctive boathouse — priced at an interest rate comparable to seven-year debt rather than 30-year securities.
The structure also will allow Harvard to remarket the bonds in 2032 as tax-exempt even if private colleges lose their ability to issue traditional tax-exempt bonds in the meantime. Stanford sold bonds with a similar structure.
Isn't time the socialist movement (higher education) pay their fair share?
