Oxford University has announced its first ever bond, which will be in the form of a 100 year bond worth £250 million. Moody’s ratings agency gave the university its highest rating and the educational institution is now seeking to raise money for investment through capital markets.
A First for the British University
This move represents the University of Oxford’s entry into a strategy being used by a growing number of U.K. higher education institutions. It has become only the latest to use a bond in order to raise funds in order to invest them through the international capital markets. It plans to raise £250 million, which will be paid back in a century.
Oxford’s bond represents a rising trend toward the use of bonds by British universities that want to raise funds. Cambridge had already offered a £350 million bond issue five years ago. Those funds were applied for a massive investment program, including an enclave construction about two miles out of the city.
Last year, U.K. educational institutions issued over £1 billion in bonds. They jumped on the opportunity to appeal to investors, where there was already a high demand, as well as the low interest rates in 2016.
JP Morgan will Sell the Bonds
JP Morgan investment bankers are Oxford’s choice for selling the bond, which many expect will be viewed as an appealing pension fund for similar organizations seeking a long-term and stable form of investment.
Though this is the first time that Oxford University as a whole has used this method for raising funds, it should be pointed out that various colleges at the university have indeed issued their own bonds.
This latest issue comes with a much longer maturity than offerings from many other universities. However, when taking into consideration the AAA rating Moody’s gave Oxford, with a “stable” outlook, the draw is still a significant one. Moody’s explained that it gave the university the highest possible rating as a reflection of the institution’s “extraordinary market position as one of the world’s elite universities, ensuring consistent student demand and wide-ranging support from the government, donors, and research funding bodies.”