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MIT Issues Rare 100-Year Bond
The Massachusetts Institute of Technology came to market Wednesday with a $750 million taxable bond offering maturing in 100 years, according to people familiar with the deal.
Bonds of that length are extremely rare, although universities–including Yale and Boston University–have issued so-called ‘century bonds’ in the past.
With interest rates near all-time lows, ultra-long-term debt is a favorable option for issuers; and with risk premiums between 10-year and longer-dated debt narrowing, borrowers, especially AAA-rated ones like MIT, can fund themselves cheaply over extended periods.
Pricing offered on the MIT deal as of its launch Wednesday was 1.30 percentage points over 30-year government bonds, according to the people familiar with it. That was lower than initial talk of 1.50 percentage points over Treasurys, and it translates to a yield of around 5.6% based on the old 30-year Treasury now yielding 4.32%.
The Cambridge, Mass. university was authorized to sell between $500 million and $750 million. Proceeds are targeted for campus renovations, as well as on-campus academic and research-related capital projects, said Nathaniel Nickerson, a spokesman for MIT. He declined to comment on the pricing.
The deal is attractive to pension funds and life insurance companies who need to match their asset portfolios to their long-term liabilities, especially since there are not many compelling long-term deals for them in today’s yield-starved environment.
“There are so few AAA corporate bonds out there,” said Bob Hiebert, senior portfolio manager at Legal & General Investment Management America, which had $18.2 billion in assets under management as of March 31 and is participating in the MIT deal. “When we look at the long end, this has a spread that compares favorably to a BBB-rated cyclical corporate bond, but it’s a much higher-rated credit.”
Interest on the bonds will be payable on Jan. 1 and July 1 each year, beginning January 2012, according to a prospectus.
The last time MIT came to the bond market was in December 2008, said Nickerson, issuing $226 million in tax-exempt bonds due in 2016, 2026 and 2036. Its last taxable issue was in 1996 for $125 million, antiestéticaturing 30-year and 100-year tranches.
Yale University issued a 100-year bond in April 1996 for $125 million with a coupon of 7.375%–the same rate as Coca Cola Co. was able to issue 100-year debt in 1993, according to data provider Dealogic. Boston University issued a 100-year bond in June 1997 for $100 million, with a coupon of 7.625%, said Dealogic.
Fuente:
The Massachusetts Institute of Technology came to market Wednesday with a $750 million taxable bond offering maturing in 100 years, according to people familiar with the deal.
Bonds of that length are extremely rare, although universities–including Yale and Boston University–have issued so-called ‘century bonds’ in the past.
With interest rates near all-time lows, ultra-long-term debt is a favorable option for issuers; and with risk premiums between 10-year and longer-dated debt narrowing, borrowers, especially AAA-rated ones like MIT, can fund themselves cheaply over extended periods.
Pricing offered on the MIT deal as of its launch Wednesday was 1.30 percentage points over 30-year government bonds, according to the people familiar with it. That was lower than initial talk of 1.50 percentage points over Treasurys, and it translates to a yield of around 5.6% based on the old 30-year Treasury now yielding 4.32%.
The Cambridge, Mass. university was authorized to sell between $500 million and $750 million. Proceeds are targeted for campus renovations, as well as on-campus academic and research-related capital projects, said Nathaniel Nickerson, a spokesman for MIT. He declined to comment on the pricing.
The deal is attractive to pension funds and life insurance companies who need to match their asset portfolios to their long-term liabilities, especially since there are not many compelling long-term deals for them in today’s yield-starved environment.
“There are so few AAA corporate bonds out there,” said Bob Hiebert, senior portfolio manager at Legal & General Investment Management America, which had $18.2 billion in assets under management as of March 31 and is participating in the MIT deal. “When we look at the long end, this has a spread that compares favorably to a BBB-rated cyclical corporate bond, but it’s a much higher-rated credit.”
Interest on the bonds will be payable on Jan. 1 and July 1 each year, beginning January 2012, according to a prospectus.
The last time MIT came to the bond market was in December 2008, said Nickerson, issuing $226 million in tax-exempt bonds due in 2016, 2026 and 2036. Its last taxable issue was in 1996 for $125 million, antiestéticaturing 30-year and 100-year tranches.
Yale University issued a 100-year bond in April 1996 for $125 million with a coupon of 7.375%–the same rate as Coca Cola Co. was able to issue 100-year debt in 1993, according to data provider Dealogic. Boston University issued a 100-year bond in June 1997 for $100 million, with a coupon of 7.625%, said Dealogic.
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