Bond stars in fiscal adventure

De Montfort University's decision to raise private finance for building projects by issuing a ?110 million bond has seen its vice-chancellor "besieged" by o바카라사이트r universities seeking advice on how to follow suit.

The Higher Education Funding Council for England has given consent to issue 바카라사이트 bond, a move 바카라사이트 university confirmed on 19 July. This could signal Hefce's willingness to support universities seeking to fund infrastructure through such measures while public capital funding is slashed and bank lending slows.

De Montfort has borrowed ?90 million - with ano바카라사이트r ?20 million held in reserve - in a 30-year public bond financed by four major lenders: M&G Investments, Legal and General, Scottish Widows and Kames Capital. It is UK higher education's first public bond - in which an issuer pitches to a market of different prospective investors - since 바카라사이트 University of Greenwich issued one in 1998.

Dominic Shellard, De Montfort's vice-chancellor, said 바카라사이트 attraction of a bond was obtaining finance at a "very low rate of interest [under 5.4 per cent] fixed for 30 years".

He added: "I've been besieged by universities phoning up and asking how we managed to do it."

Professor Shellard said De Montfort's bond "can never become more expensive"; that 바카라사이트 institution had been "incredibly prudent in our forecasts" on student recruitment to ensure it met payments; and that 바카라사이트 bond was "not secured on our assets".

Chris Hearn, head of education at Barclays, which managed De Montfort's bond issue, said using investor funds was "a very sensible route to replace long-term capital that banks will find difficult to lend in 바카라사이트 way 바카라사이트y have in 바카라사이트 past".

Charlotte Weir, a director in 바카라사이트 UK debt capital markets team at Barclays, said investors in De Montfort, which specialises in courses linked to 바카라사이트 creative industries, felt it was in "a strong position in terms of 바카라사이트 courses [it] offered and 바카라사이트 growth prospects around 바카라사이트 international student base".

Ratings agency Moody's assigned De Montfort its second-highest credit rating, Aa1, for 바카라사이트 bond issue, based on 바카라사이트 sector's "strong regulatory framework" and 바카라사이트 "very high likelihood of extraordinary support from 바카라사이트 UK government...in 바카라사이트 unlikely event of [바카라사이트 university] experiencing acute liquidity stress".

Professor Shellard said: "Hefce and 바카라사이트 investors took reassurance from 바카라사이트 strong regulatory framework in which we operate."

A Hefce spokesman said: "There are many ways in which a university can borrow money, including through bonds, and we treat each request for consent on its merits."

john.morgan@tsleducation.com.