British universities turn to capital markets

Facing government funding cuts and sharp spending increases, some British universities are turning to a new source of money – the bond market – writes Patrick Blum for The New York Times.

English universities and colleges in particular are set to raise their infrastructure spending to £3.86 billion (US$6.5 billion) this academic year, from £2.65 billion in 2012-13, the Higher Education Funding Council for England, the public sector paymaster for the sector, said last month. They plan to invest £3.3 billion a year for the next three years to improve their facilities.

To help cover the costs, they plan to borrow £560 million in the current academic year, raising their total debt to £6.83 billion by 31 July, equivalent to 27% of their combined total income, the council reported. Universities have been borrowing from their banks “for quite some time", Elizabeth Bergman, assistant vice president at Moody’s rating agency’s global higher education team, said in an interview. What’s new is that they are tapping the capital markets with public bond issues.
Full report on The New York Times site