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Northeastern Borrows $250 Million for Research Venue: Muni Deals

Northeastern University is borrowing $250 million for a new research facility on its Boston campus, including through the sale of taxable debt, which trailed the municipal-bond market in 2013.

The school this week is issuing $100 million in taxable securities and $150 million in a tax-exempt sale through the Massachusetts Development Finance Agency. Most proceeds will go to construct a $225 million science and engineering building, said Chief Financial Officer Tom Nedell.

The project, focusing on health, security and sustainability research, is intended to draw students and faculty, Nedell said by telephone. The center is scheduled to open at the beginning of the academic year in 2016, he said.

“The level of research elevates the profile of the institution broadly,” Nedell said. “It’s a cycle of continuous improvement as faculty get attracted and students get attracted to the enterprise.”

Officials are aiming for an overall borrowing cost just below 5 percent, he said.

Nedell said the sale would be Northeastern’s only new financing in 2014, though the university may refund bonds. The institution, founded in 1898, has $705 million in debt, deal documents show.

IRS Rules

To comply with Internal Revenue Service rules, Northeastern is selling taxable debt in case the building hosts research with a commercial component, he said.

The bonds are rated A2, the sixth-highest level from Moody’s Investors Service, which said it reflects the “ongoing strengthening of its student market.” The offering represents a 32 percent increase in debt from fiscal 2013, resulting in “high balance sheet and operating leverage,” the ratings company said.

This academic year, 16,995 undergraduate students are enrolled full time, compared with 15,585 in 2009, offering documents show. Tuition, room and board charges total $54,390 this year, up from $46,860 in 2009, according to the documents.

The school offers a program called Co-op, or Cooperative Education and Career Development, where students alternate academic semesters with periods of full-time employment.

In a Chronicle of Higher Education list of private-college leaders making more than $1 million, Joseph Aoun, Northeastern’s president, was second with $3.12 million in 2011. The sum included a $2 million retirement benefit that will be paid later.

Taxable munis lost 5.4 percent in 2013, compared with a 2.9 percent drop for the entire local-debt market, Bank of America Merrill Lynch indexes show. Taxable securities had outpaced the rest of muni debt from 2010 through 2012.

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