Response 'Exceptional' To Baylor's First Public Bond Issue

April 2, 2008

Media contact: Lori Fogleman, director of media communications, (254) 710-6275

Baylor University today issued $112 million of fixed long-term bonds to refinance approximately 40 percent of the university's current outstanding bonds.

"The market's response to Baylor's first public bond issue was exceptional, with requests totaling more than $600 million," said Dr. Reagan M. Ramsower, vice president for finance and administration at Baylor. "The 5 percent coupon bonds were priced to yield an average 5.07 percent, a significant discount to what the average AA higher education bond rate had been in the last few weeks."

Ramsower said the strength of Baylor's market reception was attributed by Lehman Brothers, which served as underwriter, to recognition of the strength of the Baylor name, as well as Baylor bonds being available to the public for the first time. Baylor had received a long-term rating of AA- with stable outlook from both Standard and Poor's and Fitch on these bonds.

The bonds will retire variable-rate demand bonds issued by Baylor in 2006 for $63.5 million and the 2002B series of bonds for $45.575 million. Both series of bonds were insured by XL Capital. However, the sudden drop in the credit rating of XL Capital precipitated the need to refinance, Ramsower said.

In addition, Baylor will refinance the remaining outstanding bonds next week. A new issue of variable-rate demand bonds will refinance $159 million in outstanding bonds that also were insured by XL Capital. Because of a swap, the interest rate on these bonds remains largely fixed at 4.91 percent.

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