May 8 (Bloomberg) -- Columbia University, the Ivy League school whose endowment grew the most last year, sold $100 million of 30-year bonds in its first corporate-debt offering since 1996.
The school’s 3.827 percent debt yields 80 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg.
Columbia brought its largest corporate offering to date following sales by schools including Stanford University, Northwestern University and University of Pennsylvania. The colleges are being enticed to forgo the tax-free municipal market in lieu of greater flexibility with proceeds and record-low corporate bond yields.
“The real benefit of issuing corporates is that they can use the proceeds to support the endowment or other purposes that are not allowed in the tax-free markets,” Guy Lebas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview.
Yields on investment-grade company debt rose to 3.344 percent yesterday after reaching a record 3.34 percent May 4, according to the Bank of America Merrill Lynch U.S. Corporate Master Index.
“They’re coming to market at a time when interest rates are at extraordinarily low levels so issuance costs are cheap,” Lebas said.
The bonds are expected to be rated Aaa by Moody’s Investors Service, Bloomberg data show. Goldman Sachs Group Inc. and JPMorgan Chase & Co. managed the offering, the data show.
Columbia will use proceeds to pay off existing debt and to fund capital expenditures, according to a person familiar with the offering, who declined to be identified citing lack of authorization to speak publicly about the sale.
Stanford sold $143.2 million of 4.013 percent, 30-year top-rated bonds at 70 basis points over similar-maturity Treasuries in April, after University of Pennsylvania sold $300 million of 4.674 percent, 100-year debt graded Aa2 by Moody’s and AA+ by S&P at a spread of 140 basis points.
“There is a dearth of AAA rated assets, so the highest-rated universities have an instant demand,” Lebas said.
Columbia, whose main campuses are in New York, previously issued debt in October 1996, selling $36.3 million of 7.36 percent bonds due October 2021, and $47 million of 7.19 percent notes that mature in October 2016, according to data compiled by Bloomberg.
Robert Hornsby, a Columbia spokesman, didn’t immediately return a phone call seeking comment about the sale.
The school’s endowment gained 24 percent in the year through June 30.
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