Decorative element finance campus image

Debt Management

The University issues debt to fund various capital projects, including land and building purchases. The issuance process and post-issuance compliance is the responsibility of this office. Internal guidelines have been established to ensure that each debt transaction of the University is completed in the most effective and professional manner, and in accordance with the highest standards of the industry, laws and governmental practices.

What is the U's outstanding debt balance?

Debt Profile as of June 30, 2022

$1.8 billion par outstanding; $1.6 billion University supported
Ratings:
Aa1 - Moody's 
AA - S&P
 

Chart showing the types of debt; details follow image.


 

  • General Obligation Bonds - Fixed Rate ($933.0mm)
  • General Obligation Bonds Interest-only - Fixed Rate ($500.0mm)
  • Special Purpose Revenue Bonds Fixed Rate ($182.7mm)
  • State IDB & Note Payable Fixed Rate ($5.7mm)
  • Commercial Paper Variable Rate ($209.1mm)
  • Unamortized Premium/Discount ($154.7mm)


 

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Debt Ratings

Moody's

Aa1, with stable outlook (Moody's Investors Service)

Aa1 rating – The Aa1 rating reflects the University’s excellent brand and strategic positioning derived from its strong student and research market positions combined with ample financial resources.

Stable Outlook – reflects Moody's expectations of favorable student demand, tuition revenue and sponsored research trends. The outlook also incorporates longer term stable to improving EBIDA margins and debt service coverage.

S&P Global Ratings

On January 22, 2024, S&P Global Ratings (S&P) affirmed the University's "AA" long-term rating with a stable outlook highlighting the University's position as Minnesota's flagship research University and land-grant institution, healthy financial resources, diverse revenue streams, low-to-moderate debt burden, and prodigious fundraising.  In addition, S&P affirmed the University's "A-1+" short-term rating reflected by the University's own self-liquidity and credit quality. S&P acknowledges the soft enrollment trends, somewhat weak financial performance, and the uncertainty with its affiliation agreement with Fairview as offsetting factors.

The most recent rating report: S&P Global Ratings - Report dated 1-22-2024

Current Debt Reports/Liquidity

 

 

Current Official Statements

Debt Management Support/Oversight

Debt Oversight Group (DOG)

The DOG supports and advises the Treasurer and Director of Debt Management in decisions regarding policy development, capital financing strategies, and debt capacity analysis. In addition, the committee periodically reviews the debt management processes to insure compliance with University and tax requirements. Meetings are scheduled monthly. University members in addition to the Treasurer and Director of Debt Management include the following individuals:

  • Controller
  • Tax Director
  • Accounting Director
  • Chief Investment Officer
  • Associate General Counsel
  • Assistant Vice President, University Services

Debt Process Team (DPT)

The DPT acts as the University's trustee to approve the draws on unspent bond proceeds to reimburse expenditures incurred on eligible projects. In addition, the group establishes and insures that appropriate accounting and compliance procedures are in place and working properly. Meetings are scheduled monthly. The team consists of representatives from applicable departments within the University that have a direct involvement in various aspects of debt management compliance. These departments include:

  • University Services-Finance
  • Treasury Accounting (within the Controller's Office)
  • Treasury Operations (within the Office of Investments and Banking)
  • University Tax Management

Debt Management Advisory Committee (DMAC)

The Debt Management Advisory Committee (the "Committee") advises the Finance Committee of the Board of Regents and the University's Treasurer on the issuance and ongoing management of debt. In doing so, the Committee evaluates, recommends, and monitors debt management policies, strategies, and guidelines and provides advice on their implementation so as to best serve the financial objectives of the University of Minnesota. A regent who is a member of the Finance Committee chairs the Advisory Committee. The President appoints the remaining members who consist of:

  • The Treasurer of the University;
  • A faculty member of the Carlson School of Management whose area of expertise is relevant to the work of the committee; and
  • Up to six members of the local business community with relevant professional training and experience.

Debt Management Advisory Committee Bylaws

Debt Policies and Procedures

Archived Debt Ratings

2021

2020

2019

2018

2017

2016

2015

Archived Official Statements

Archived Debt Reports/Liquidity

Liquidity Letters

Liquidity Support

University Debt - Flow of Funds
Decorative element Flow of funds for debt management - chart

The flow of funds into and out of the University is depicted as a circle, starting and ending with the external bondholders in the capital markets.

Receipt and Spending of Proceeds

  • University debt is sold in the capital markets to investors.
  • Debt proceeds are received by the University and invested by the Office of Investments and Banking (OIB) prior to being spent on University capital projects.
  • Most universities use an outside trustee who authorizes the draws on the proceeds for the capital projects. The University’s Debt Process Team acts as the University’s trustee.

Internal Funding and Repayment of Debt

  • University colleges, auxiliary units and administrative units benefit from the capital projects and are charged debt service (principal and interest) for the use of debt on space that they occupy.
  • The debt service charges are collected centrally and considered University equity.
  • University equity is used to fund the principal and interest payments due to the bondholders.
Debt Mgmt: Phase I
Decorative element Phase 1: Pre Issuance chart
Phase I: Pre Issuance

the initial planning for a future debt issuance.

  • Capital Project Management (CPM) performs project and cash flow analysis to determine the need for & timing of debt financing for various projects.
  • The Office of Tax Management determines if there is private use on the project(s) as that may determine whether or not taxable debt is issued.
  • The Debt Management Office calculates debt capacity, reviews the debt funding needs for projects being contemplated, and ensures there is a Declaration of Intent to Reimburse signed by the Treasurer.
  • The Board of Regents approve the projects, approve the Resolution Related to Issuance of Debt, and approve the recommended underwriter(s) to be used for the future sale.
Debt Mgmt: Phase II
Decorative element Phase 2: Post issue compliance chart
Phase II: Issuance

The University’s Treasurer has overall responsibility for the debt issuance.  The working group involved in a negotiated sale of debt includes representatives from University Finance, including the Office of Tax Management, the external underwriter(s), underwriter’s counsel, issuer’s counsel (a member of the University’s Office of General Counsel), the University’s municipal debt advisor and the University’s bond counsel. 

Debt Mgmt: Phase III
Decorative element Phase 3: Post issuance compliance
Phase III: Post Issuance Compliance

The individuals from different University units that are members of the Debt Process Team work together to act as the University’s trustee to approve draw requests and to oversee compliance after the debt is issued.

  • The Office of Debt Management monitors the spending of the proceeds to determine if spending guidelines are met, ensures the Treasurer signs designation certificates where there are excess proceeds to be designated for a project not originally contemplated, maintains the bond documentation to be retained over the life of the bonds, and submits annual continuing disclosure.
  • The Office of Tax Management oversees occupancy dates, timing regulations, performs arbitrage rebate and private use monitoring.
  • Project Accounting tracks expenditures to projects and prepares draw requests.
  • Treasury Operations (within OIB) invests the bond proceeds, draws the funds when the requests are approved, and makes the principal and interest payments to the bondholders.
  • Accounting Services records all related general ledger entries associated with the draws and the allocation to specific projects.

Quick Links

Contact

Director: Arcelia Detert
Phone Number: 612-624-2858
[email protected]

Campus mail: 338 Morrill Hall MC 0263

100 Church St SE, 338 Morrill Hall, Minneapolis, MN 55455