Oxford issues ‘remarkable’ £750 million, 100-year bond

The University of Oxford has announced a “remarkable” £750 million, 100-year bond, the largest yet in UK higher education.

The university, which secured an annual interest rate of 2.54 per cent on the bond thanks to its triple-A Moody’s credit rating, stronger than the UK government’s Aa2 rating, said that the money raised would finance “major new physical and virtual infrastructure development”, including “strategic capital projects that extend its outstanding capabilities in teaching and research”.

The universities of Cambridge, Liverpool, Leeds, Manchester and Southampton have already issued bonds, as have Cardiff, De Montfort and Keele universities. Oxford’s bond goes far beyond the previous largest – Cambridge’s £350 million, 40-year bond.

Universities with a bond will have to pay interest on the borrowing each year and then repay the principal amount at the end of the bond term.

Critics point out that bond borrowing must create new revenue streams that are sufficient to service the debt.

David Prout, Oxford’s pro vice-chancellor for planning and resources, told Times Higher Education: “This is a remarkable thing to have achieved today. It is a global statement of confidence in UK higher education in general and Oxford in particular.”

The money would support a £1.5 billion capital programme over the next 10 to15 years, said Dr Prout.

Decisions on the spending of the money will be “bought into right across the university and taken in a strategic way”, and directed to projects and programmes that “most benefit Oxford in terms of the academic mission of the university”, he continued.

He added: “This is a very long-term bond; [the] interest rate [of] just over 2.5 per cent is less than CPI [inflation] at the moment. It’s a great deal for Oxford.”

Asked about any potential concerns over Oxford’s level of borrowing, he said: “Oxford has managed to get a great deal on this loan. It’s a very, very long-term loan. We will take decisions that ensure that we are able to service this loan in the best possible way.”

Louise Richardson, Oxford vice-chancellor, said: “The rating we have received and the scale and duration of the bond that has been issued is a gratifying testament to the belief of the outside world in the extraordinary institution that has been developed over the centuries by our predecessors, as well as in the calibre of the research and education taking place here today.

“It is our responsibility to ensure that we use the opportunities accorded us by this bond to pass on to our successors an even stronger university.”

Oxford was advised on the bond, which matures in 2117, by JP Morgan Securities as lead adviser.

The university also said that the finance raised would allow it “greater freedom to generate far-reaching new academic projects, which will help power growth along the strategically crucial Oxford-Milton Keynes-Cambridge corridor”.

john.morgan@timeshighereducation.com