Oxbridge bat­tle of the bonds

Is a bor­row­ing arms race brew­ing?

THE (Times Higher Education) - - CONTENTS - John.mor­gan@timeshigh­ere­d­u­ca­tion.com

The Uni­ver­sity of Cam­bridge is fac­ing in­ter­nal crit­i­cism over plans to bor­row up to £600 mil­lion, in a move that sug­gests the emer­gence of a bor­row­ing “arms race” with the Uni­ver­sity of Ox­ford.

Cam­bridge’s plans for a new bond, which fol­lows a £350 bil­lion bond is­sued in 2012 and Ox­ford’s rais­ing of £750 mil­lion via a bond launch last De­cem­ber, is in­tended to fi­nance in­come-gen­er­at­ing in­vest­ments in “non-op­er­a­tional es­tate” such as hous­ing and re­tail de­vel­op­ments. It could be seen as a sign of the huge fundrais­ing power of the UK’s top-tier higher ed­u­ca­tion in­sti­tu­tions – and of how they are seek­ing to keep pace with US ri­vals that boast huge en­dow­ments.

Nine UK uni­ver­si­ties have now is­sued bonds, but all of them apart from Ox­ford and Cam­bridge had their credit rat­ings down­graded last Septem­ber in the wake of Brexit, with Moody’s warn­ing of lower in­ter­na­tional stu­dent re­cruit­ment and in­creased com­pe­ti­tion.

Cam­bridge’s coun­cil, its ex­ec­u­tive body, last month said that it wanted to seek ap­proval from the gov­ern­ing Re­gent House for fur­ther bor­row­ing of up to £600 mil­lion (Re­gent House had al­ready given ap­proval for ex­tra bor­row­ing up to £300 mil­lion).

Two mem­bers of Cam­bridge’s coun­cil have signed a “note of dis­sent” ex­press­ing con­cern about the plan, which has yet to go be­fore Re­gent House for ap­proval.

“We have yet to see a suf­fi­ciently clear busi­ness case with enough de­tail on the fund­ing model and how re­pay­ments for a new bond will be achieved,” says the note of dis­sent.

The coun­cil re­sponded in a re­port pub­lished on 10 May in the uni­ver­sity’s of­fi­cial jour­nal, the Re­porter, say­ing that “spe­cific busi­ness cases are in­deed im­ma­ture at this stage”, but that it has “a high de­gree of con­fi­dence in the col­lec­tive po­ten­tial of such projects”.

Dun­can Maskell, pro vicechan­cel­lor for plan­ning and re­sources, said at a Re­gent House dis­cus­sion of the new plans on 1 May that the uni­ver­sity “needs cap­i­tal” for pur­poses in­clud­ing “the po­ten­tial com­mer­cial el­e­ments of de­vel­op­ment schemes such as Old Press/ Mill Lane [ where a re­tail de­vel­op­ment is planned]” and “the de­vel­op­ment of com­mer­cial re­search fa­cil­i­ties at West Cam­bridge”, as well as to in­vest in hous­ing for staff.

He added that “ap­proval for a bond is­sue is be­ing sought now so as to lock in cur­rently low in­ter­est rates”.

Ross An­der­son, pro­fes­sor of se­cu­rity en­gi­neer­ing at Cam­bridge, one of the two sig­na­to­ries of the note of dis­sent, told Times Higher Ed­u­ca­tion: “The ques­tion here is, quite sim­ply, ‘Should we back the uni­ver­sity as a prop­erty de­vel­oper?’ The an­swer, from ex­pe­ri­ence, is ‘No more than we have to’.”

Gill Evans, emer­i­tus pro­fes­sor of me­dieval the­ol­ogy at Cam­bridge, said that she was con­cerned by a plan “to bor­row a gi­gan­tic sum spec­u­la­tively on the stated ba­sis that in­ter­est rates are cur­rently low”.

Mighty fundrais­ing power of the UK’s top-tier uni­ver­si­ties

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