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University of Hawaii Sells $293 Million of University Revenue Bonds

BY KRISTIN BONILLA -- Bonds will help finance construction of new facilities throughout the university system

On September 21, the University of Hawaiʻi System sold $293.425 million of University Revenue Bonds, Series 2010A&B, which included both traditional tax-exempt bonds and taxable Build America Bonds. The Series 2010A Bonds are being issued to finance the construction of new facilities for the university’s Cancer Research Center of Hawaiʻi at Kakaʻako. The Series 2010B Bonds are being issued to finance various projects across the university system, including the construction of the new UH West Oʻahu campus, the information technology building, renovation and addition to UH Mānoa's Campus Center and energy conservation and efficiency projects at the community colleges.

“This is a very good day for the University of Hawaiʻi,” said UH President M.R.C. Greenwood. “The funds we raised will enable us to move forward with a number of key projects to serve our students and the people of Hawaiʻi. We’re very grateful to all of the investors who purchased these bonds, particularly our Hawaiʻi investors, for their confidence in the university.”

The all-in true interest cost of the bonds was 3.70 per cent, a cost significantly lower than any recent bond issue by the university. The university achieved this milestone by taking advantage of the Build America Bond program, which is part of the American Recovery and Reinvestment Act of 2009. This program involves the sale of taxable bonds. In turn, the U.S. Treasury will provide the university with an interest rate subsidy of 35 percent over the life of the bonds. The subsidy makes the taxable bonds more cost effective than traditional tax-exempt bonds.

Retail demand for the university’s tax-exempt bonds was strong, especially within Hawaiʻi, as the university generated over $118 million of retail investor orders. The university received an additional $196 million of orders for the taxable Build America Bonds from a broad mix of institutional investors such as corporations, insurance companies, and mutual funds. The bonds carried a final maturity of October 1, 2040.

Moody’s Investors Service, Standard & Poor’s and Fitch Ratings affirmed the university’s outstanding ratings of Aa2/A+/AA, respectively, citing the university’s dominant market position within the State of Hawaiʻi, fairly consistent and significant levels of state financial support, healthy enrollment trends and sound balance sheet liquidity.

An internet-based investor presentation was instrumental in reaching the expanded base of investors for the taxable Build America Bonds. The sale began on Monday with a retail-only order period, and concluded with an institutional order period on Tuesday. The bonds were underwritten by Bank of America Merrill Lynch, and a selling group of local Hawaiʻi brokers was utilized to maximize Hawaiʻi retail participation.

Contact: Kristen Bonilla, (808) 956-5039 Public Information Officer, External Affairs and University Relations

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