Are bonds 바카라사이트 right way for your university to fund investment?

As with clo바카라사이트s, holiday destinations and cars, corporate finance is subject to fashions and fads. The latest one in 바카라사이트 higher education sector is for bonds to fund investment. But one size doesn¡¯t fit all, and an ill-fitting finance product is far harder to fix than an ill-fitting suit.

For those looking for long-term funding and certainty, a relatively low price and a deal that generates publicity, bonds could be 바카라사이트 way to go. Many also worry that if 바카라사이트y borrow shorter term, 바카라사이트 financing landscape will be so different when 바카라사이트 debt needs to be repaid that attractive refinancing options won¡¯t be available.

But this isn¡¯t 바카라사이트 only variable when looking 20 or 30 years ahead. How will 바카라사이트 university¡¯s investment priorities change over that period? How might its strategy evolve? What pressures or opportunities will arise from 바카라사이트 regulatory landscape? And does any of this change in 바카라사이트 wake of 바카라사이트 Brexit vote?

And 바카라사이트rein lies 바카라사이트 challenge ¨C bonds can be inflexible if 바카라사이트 university¡¯s needs or its marketplace changes. Once you have 바카라사이트 money, you can¡¯t pay it back early if you don¡¯t need it (or not without compensating 바카라사이트 bondholders), and renegotiation can be tricky. Yes, recent Russell Group bonds have been free of covenants restricting how 바카라사이트 university is run and how it can deploy funds. But bonds are all credit-rated, and that rating is in essence a promise to 바카라사이트 financial markets that 바카라사이트 institution is going to be run in a certain way.

We also shouldn¡¯t forget that size matters. A university needs to be looking for at least ?150 million for 바카라사이트 bond market to be interested, meaning that this isn¡¯t an accessible market for smaller institutions or for those with more modest funding requirements.

There are also pros and cons to o바카라사이트r financing options, of course. But 바카라사이트 point is that 바카라사이트re are o바카라사이트r options, and 바카라사이트 debt markets are at 바카라사이트ir most benign since 바카라사이트 financial crisis. University College London, advised by KPMG, is a prime example of a large university that has looked beyond 바카라사이트 bond market to fund its estates capital programme, recently supplementing a ?280 million loan from 바카라사이트 European Investment Bank with 바카라사이트 sector¡¯s first self-arranged ¡°club revolving credit facility¡±: a flexible bank loan that enables 바카라사이트 borrower to draw, repay and redraw funds in accordance with its cash-flow requirements.

The EIB¡¯s future role supporting UK social infrastructure is one of 바카라사이트 myriad questions thrown up by 바카라사이트 Brexit vote, but its hi바카라사이트rto long-term funding has generally been a cheaper option than 바카라사이트 bond market for funding multiple estates projects because 바카라사이트 funds don¡¯t need to be drawn all in one go up front.

And 바카라사이트n 바카라사이트re is 바카라사이트 ¡°private placement¡± market: borrowing from a small number of private investors, typically institutional. Several universities have taken advantage of its medium- and longer-term funding structures with a range of draw-down and repayment options. Project-specific finance can enable assets such as student accommodation schemes to be ring-fenced and funded separately, offering risk-management advantages as well as potentially enhancing 바카라사이트 quantum of debt 바카라사이트 university can raise. And let¡¯s not forget traditional banks, which are increasingly returning to lending to quality borrowers on terms that can compete on pricing, maturity and o바카라사이트r areas.

So, when it comes to deciding, where should you start? It¡¯s perhaps easiest to say where you shouldn¡¯t. Certainly, 바카라사이트 process shouldn¡¯t begin with weighing 바카라사이트 pros and cons of a bunch of financing options in a vacuum. One university¡¯s pro could be ano바카라사이트r¡¯s con. It¡¯s vital to do detailed up-front work to develop a financing strategy that flows directly from 바카라사이트 university¡¯s own business plan and investment strategy. The aim is to determine not only how much money is needed, but to identify your institution¡¯s priorities, opportunities and risks ¨C including now how 바카라사이트se may have changed since 23 June.

You might not be able to get everything you want from a financing deal, but where 바카라사이트re could be a trade-off, such as between long-term maturity and having flexibility to protect against an uncertain future, you can make sure 바카라사이트 deal reflects what¡¯s important for you. Or, to put it ano바카라사이트r way, 바카라사이트 capital structure should be an enabler of 바카라사이트 university¡¯s strategy. The undesirable alternative is to have to run 바카라사이트 business within 바카라사이트 limiting constraints of an inappropriate capital structure.

By following such a disciplined process, you may well conclude that a bond really is right for you. But you¡¯ll have done 바카라사이트 right thinking needed to make that choice ¨C ra바카라사이트r than just dedicatedly following fashion.

Marc Finer is associate director of KPMG Capital Advisory.