University of Canterbury announces NZ$100 mln bond issue

The University of Canterbury has stepped into unexplored territory with New Zealand's first listed philanthropic bond issue. The NZ$100 million bond issue will be used to fund major capital projects, Vice-Chancellor Rod Carr (ex RBNZ) said. The bonds will pay 7.25% for five years, with the rate reset for a further five years at a margin of 1.75% over the then prevailing 5 year swap rate. The bonds will mature in 2019. The philanthropic nature of the issue allows investors to reduce the interest to zero for some or all of their bonds. Investors are also able to choose to donate back to the university some, or all, of the sum owed at maturity. Here is the release from the University of Canterbury:

The University of Canterbury plans to raise up to $100 million for major capital projects through New Zealand's first listed philanthropic bond issue. Vice-Chancellor Dr Rod Carr describes the issue as an exciting opportunity for New Zealanders to make a direct investment in education infrastructure and help the University progress from being a high-quality institution to one that can truly call itself host to a world-class learning environment. Dr Carr says in the next 10 years the University plans to invest as much as $500 million in developments such as building refurbishments, new buildings, ICT infrastructure and alternative technologies to develop a world-class learning environment that attracts outstanding scholars from across the spectrum of academic disciplines. "We need to promote a learning environment that attracts people who have the desire and potential to make a difference. We owe it to our children and grandchildren to do all we can to stop what I fear could become the great brain robbery. "Increasing numbers of universities in Australia, India and China are not only better equipped than us, they are investing substantially more in support of their teaching and research. If we, as a nation, do nothing we may as well tell young New Zealanders to go elsewhere if they want an education that will help them to excel in the modern world and the brain robbery will continue." The University's ambition to realise its potential is being constrained by the funds it retains from grants and fees for teaching and research, one-off grants from government, and donors. "This bond issue, the first by a New Zealand tertiary institution, aims to secure additional resources for world-class teaching and research facilities that will enable the acceleration of the current investment plan." The offer is for $50 million fixed rate bonds with philanthropic options with the ability to accept oversubscriptions of a further $50 million. Investors will be paid 7.25 per cent interest for five years, with the rate then reset for a further five years, and be entitled to full repayment when the bonds reach maturity in 2019. The offer opens on 9 October and closes on 30 November. Murray & Company and First NZ Capital are the Joint Lead Managers. By subscribing to the issue investors are able to direct their savings to building infrastructure to benefit teaching and research at the University. "We will also offer investors the options of reducing the interest to zero for some or all of their bonds "“ a decision that they can change should their circumstances change. That reduced burden on the University will enable it to fulfil its capital works programme sooner than would otherwise be the case. During the term of the bond we will also invite investors to consider donating part, or all, of the sum owed on maturity. We will continue to pay the investor interest on bond principal they have donated if they so elect," Dr Carr says. "This optional philanthropic element of the bond issue will allow investors to direct their support to higher education while tailoring their contribution in light of their own circumstances which may change over the term of the bond." Dr Carr believes the University's vision of people prepared to make a difference will be appealing to those seeking an investment that provides more than what has traditionally been available to investors. "By taking part in this bond issue investors will, themselves, be demonstrating their willingness and commitment to making a difference. Their investment stays in New Zealand; it benefits New Zealand and New Zealanders by building capacity to contribute to society through knowledge." No money will be received until investors have a copy of the investment statement.