Harvard University, the country’s richest college, is issuing $1.1 billion in bonds so it can access funding costs at a time when steep interest rate cuts have been made in response to the coronavirus pandemic, reported Bloomberg.
Harvard UniversityThe move is designed to lock in the lower rates, a Harvard spokesman told Bloomberg. The proceeds of the bond offering will be used to refinance outstanding debt, Bloomberg said, citing a Moody’s Investors Service report.
The university last month projected a drop in revenue and a slowdown in philanthropy due to the economic turmoil caused by the pandemic. Harvard has a $40.9 billion endowment.
The higher education sector as a whole will be hit hard due to revenue losses, endowment-related investment losses, losses from tuition and room and board refunds and the cancellation of a variety of events including sporting competitions.
Still, for Harvard, this bond offering “is part of long-term planned debt activity,” said Susan Shaffer, a vice president at Moody’s who specializes in higher education.
“Their liquidity is ample. They are very well managed and had already put into place, as most top-notch universities do, regular scenario analysis for potential recessionary conditions or other things that could cause operational stress. This could be smart timing because interest rates are low,” Shaffer said.
