Oxford University Turns to the Debt Market

    By Kaofenlio (Own work) [CC BY-SA 3.0] via Wikimedia Commons

    In an attempt to raise funds, Oxford University, the oldest higher education institution of England, is set to have its 100-year debt up for sale.

    The said bond, which is anticipated to raise a minimum of £250m, would be the first from Oxford University. Its colleges have tapped the debt market previously as the University College raised £40m in bonds in 2015.

    A triple-A rating to the debt was assigned by Moody’s, stating that this reflected the university’s “extraordinary market position as one of the world’s elite universities” and its “position as a world-leading research institution.”

    Jeanne Harrison, the senior analyst Jeanne Harrison in the rationale statement of the agency said: “Oxford has seen consistently strong demand from students, both domestic and international, which we expect to continue.”

    Moody’s continued that Oxford University possesses a “strong balance sheet with a large endowment and low leverage.” Last year, its research funding amounting to £730m was the highest amongst its peers in the United Kingdom.

    However, the overall profitability of Oxford University “is weaker than its peers,” driven by the low overhead recovery from research, high staff pay, and growth in non-pay departmental spending.

    Government spending on higher education has been reduced in the wake of increases in tuition fees. The bond of Oxford is the newest in a string of instances where universities in the United Kingdom have turned to the financial markets in order to raise cash. With a 100-year maturity, the bond of Oxford will have the longest duration of any higher education bond.

    In 2016, Cardiff University raised £300m through a bond with a 3.1 percent interest rate.