On Aug. 1, the University of Pennsylvania successfully priced $300M in century bonds at a yield to maturity of 3.61%. This is the lowest interest rate ever achieved on a domestic century bond by either a corporate or non-profit issuer. Century bonds are a rare security with a final maturity in 100 years—in this case 2119—afforded only to the most select and highly-rated institutions.
In 2012, Penn issued a then-record setting $300M in century bonds at 4.74% to finance an ambitious slate of campus-wide sustainability initiatives.
Penn will use the newly borrowed funds to support capital projects defined within the University’s Capital Plan, including renovations of existing infrastructure, current capital projects such as New College House West and Wharton Academic Research Building, and future capital projects.
Penn’s finance team seized this opportune moment in the markets to take advantage of historically low interest rates and overwhelming demand from investors. Morgan Stanley led the underwriting syndicate. Due to strong investor demand, the bonds were more than five times oversubscribed, leading to a 10 basis point reduction in the credit spread above the 30 Year Treasury from 125 to 115 basis points.
Responding to the news, Penn Vice President for Finance and Treasurer MaryFrances McCourt said, “We are delighted with the tremendous investor interest and feel it is a testament to the longevity and financial strength of Penn.”
This is the second issuance of a century bond for Penn. The University leveraged the first century bond (also $300M) issued in the spring of 2012 to invest in energy-saving upgrades to lighting and HVAC systems in support of its commitment to a Climate Action Plan and carbon reduction.