The University of Hawaii entered into a revenue bond transaction that resulted in significant annual debt service savings. On October 13 and 14, uh sold over $218 million in uh revenue bonds, of which $208 million repaid existing university bonds, realizing more than $44 million in debt service savings over the next 20 years, thanks to AF 2041.
“uh will see reductions in debt service savings from AF 2021 by approximately $3.3 million, then approximately $2 million each year for the next 19 years,” said the vice president of budget and finance and CFO Kalbert Young. “Overall, the transaction results in a good result for the university. The amount of annual debt service savings is significant and should contribute to fiscal relief.
Debt service savings will be attributable to a number of units across multiple campuses. The uh The Cancer Center will see approximately 50% of the total debt service savings, as most of the bonds repaid were bonds sold in 2010 to build the uh Cancer Center. There will also be savings for certain units at uh Manoa, uh community college system and uh West Oʻahu. The bond transaction also included $10 million in new debt that will be used to finance major renovations to the uh Mānoa lower campus parking structure.
The transaction follows credit rating actions on uh by two financial rating agencies, Moody’s Investor Service and Fitch Ratings.
On October 7, Moody’s Investor Service downgraded its credit rating to uh to ‘Aa3.’ By adjusting the credit profile, Moody’s reaffirmed uhthe outlook of “stable” noting its critical role in the state of Hawaii as the sole provider of public higher education and a major economic engine within the state. Other noted factors contributing to uh its strengths include its programmatically diverse enrollment, strong partnership with the State of Hawaii and a growing research business.
Fitch Ratings reaffirmed its “AA” rating on the university as well as its “stable” outlook. The ratings reflect Fitch’s expectations that the university’s financial profile will withstand near-term pressures from the pandemic as enrollment stabilizes and it manages a significant capital improvement program.