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March 4, 2022

MSU successfully issues innovative and strategic century bond

Michigan State University has successfully issued $500 million in century bonds at a yield to maturity of 4.165%. A century bond is an innovative security with a final maturity in 100 years offered to select and highly rated institutions. The century bond structure provides MSU with greater flexibility to use the proceeds to support a variety of priority projects and initiatives.


“Century bond proceeds will support MSU’s strategic objectives as outlined in our 2030 strategic plan by providing a sustainable, low-interest funding source,” said President Samuel L. Stanley Jr., M.D. “The financing also enables us to address both near- and long-term capital needs, invest in research and health care initiatives, as well as provide a stewardship tool to invest in innovative and transformative projects now and for future Spartan generations.”


The decision to issue a century bond was based on a desire to add new capital to achieve strategic goals, add diversity to the debt portfolio and take advantage of near-historic low rates. The MSU finance team evaluated bond issuance opportunities with the university’s external financial adviser and lead investment banks.


“Throughout this process, CFO Lisa Frace and other senior leaders showcased the university’s strong financial position and positive results from the previous fiscal year,” said Melanie Foster, MSU Trustee and chair of the Board Committee on Budget and Finance. “The opportunity to issue a century bond is only available to institutions with high-quality credit, and it’s a point of pride to be the first institution in Michigan to have successfully issued one.”


“We’re proud to have received tremendous investor interest — it shows an affirmation of strength in the MSU brand and reinforces long-term financial strength,” added MSU Trustee Pat O’Keefe. “The trustees remain delighted by the opportunity to improve the longevity of MSU’s financial stability.”


Longterm financing rates remain near historic lows. Even in volatile market conditions, MSU’s century bond has locked in guaranteed returns for investors. Due to ample investor demand, the bonds were more than 2.2 times oversubscribed.


“Our ability to execute a century bond in 90 days in light of recent market volatility speaks volumes to the strength of our team, fiscal responsibility and stability,” said MSU Senior Vice President, Chief Financial Officer and Treasurer Lisa Frace. “This strategic investment in our future allows us to position the institution for continued research and academic excellence while being prudent stewards of our finances."


The execution of a new century bond comes on the heels of the university’s updated ratings from Moody’s Investors Service and S&P Global Ratings. S&P updated MSU’s outlook to AA stable, an improvement from the prior rating of AA negative. Moody’s maintained an Aa2 rating. Bank of America Securities Inc. and Morgan Stanley & Co. LLC were senior managers with Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Loop Capital Markets LLC and Siebert Williams Shank & Co. LLC rounding out the syndicate. Blue Rose Capital Advisors LLC was the municipal financial advisor and Miller, Canfield, Paddock and Stone PLC was issuer counsel.

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