University of Colorado to Open '07 With $200M Deal
BYLINE: Elizabeth Albanese
The University of Colorado Regents will open 2007 with a bang--specifically, a $200 million refunding in the first or second week of January, its biggest bond issue since a $230 million deal in October 2005. The deal also marks the first the university will sell with the guidance of David Solin, the university's associate treasurer and director of liability. Solin was hired away from the private sector, where he spent six years as managing partner of a private mezzanine capital firm. Prior to that stint in the private sector, however, Solin was the director of the Colorado office of economic development under Gov. Bill Owens, and also as Owens' deputy treasurer when the latter served as state treasurer in the late 1990s. Prior to becoming involved in state government, Solin worked in the mortgage lending division of the First Interstate Bank of Denver and business banking group of Wells Fargo Bank in San Francisco. "I'd just begun with the University of Colorado on the 10th of last month," Solin said. "On my first day, they told me to begin putting together a plan for a Series 2007A refunding issue."
Solin said he expects the sale to be in the $200 million range, though the size will not be finalized until the sale date draws nearer. "The deal is being sold for savings and for capacity," he said. "The past challenges of Referendum C and TABOR have caused higher education to fall behind in terms of issuance over the last several years."
TABOR, or the 1992 Taxpayer Bill of Rights, limits year-to-year spending increases based on economic growth and inflation. After the state succumbed to several consecutive years of revenue shortfalls, the state's budget had been pared to the bare bone. Higher education funding was hit particularly hard as lawmakers struggled to write budgets that met the state's constitutionally required spending demands, much less provide additional funding for non-mandatory items. Although the state's economy picked up beginning in late 2004, TABOR required lawmakers to return to taxpayers all general fund revenue in excess of the budget -- which by that time, had been reduced by about $1 billion -- rather than plowing it back into the budget to return state spending to pre-2001 levels.
Colorado voters, however, provided some relief during the 2005 November general election, when they approved a plan to allow the state to maintain revenue collections in excess of the budget limitations for five years, bending the restrictions of the 1993 Taxpayer Bill of Rights, which requires all surplus revenue to be refunded to taxpayers. "In addition to the additional budget flexibility, Governor-elect Bill Ritter has vowed strong support for higher education," Solin said. "Hopefully, we'll be able to get back on track."
Stifel, Nicolaus & Co.'s Hanifen Imhoff Division will serve as the lead manager for the Series 2007A refunding. The remainder of the underwriting syndicate will be announced in coming weeks.
BD Advisors is the university system's financial adviser. Solin said the CU System hopes to realize present-value savings of about 3% via the January refunding, which will include the shift of some outstanding debt from the system's regular debt program -- freeing up capacity there -- to its enterprise fund program. "We do expect the bonds to be insured," Solin said.
While the structure of the deal has not yet been determined, Solin said he believes the final maturity on the Series 2007A bonds will be in 2033. While ratings have not yet been provided for the upcoming bond issue, the university received ratings of AA-minus from Standard & Poor's and Aa3 from Moody's Investors Service on its last bond issue, a $101.4 million offering sold in August.
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