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Oxford University to Issue 100-year Bond

Posted by Richard Ward in ,

Image courtesy of Flickr, Creative Commons

The University of Oxford is looking to raise £250 million through the international capital markets, by issuing a bond it plans to pay back in 100 years time.

JP Morgan have been appointed to sell the bond, which is expected to be an attractive option for pension funds looking for stable, long-term investment.

The announcement follows a similar move by Cambridge, which itself offered a £350m bond issue in 2012. The proceeds were subsequently used to fund a huge programme of investment.

Although individual Oxford colleges have issues bonds in the past, it marks the first time the university as a whole has raised finance this way.

Despite the 100-year maturity, credit rating agency Moody's awarded the bond its highest Aaa rating, along with a "stable" outlook.

According to Moody's, the high rating reflected the institutions "extraordinary" position in the market as one of the world's leading universities. The agency also noted that Oxford has seen consistently strong demand from students, both domestic and international, which is expected to continue.

However, Moody's did list potential threats to Oxford's stability, including vulnerability over retention of staff. It added: "Downward pressure would be exerted on the ratings by a deterioration in Oxford's strong market position, triggered by external pressures or weak strategic planning, resulting in lower student demand or an inability to attract research funding or high-calibre staff".

"Additionally, a significant weakening of operating performance including that of OUP could exert downward pressure on the rating."

Last year, there were USD 1.8 bn of bonds issued by UK schools and universities, the highest on record.