De Montfort University issues £110m of bonds, Geoff Fuller explains the process, the potential risks and benefits and answers the question: should other universities follow suit?
A potential new source of finance for universities opened up recently, when De Montfort University issued £110m of bonds to finance an upgrade of its facilities. Whereas bond issues by US universities are common, particularly among the Ivy League, they are rare in the UK. That may be however about to change. With important changes to university funding, banks unwilling to lend long-term at fixed rates, and interest rates in the bond markets currently very low, the bond markets are an attractive financing option for universities.
(the Higher Education Funding Council for England), responsible for distributing public funds to universities has currently allocated funds using a formula to determine how much each university requires. Universities can then decide how to apply this funding, subject to complying with certain criteria.