Debt Management

Major responsibilities

• Monitors the debt structure of the university and financing conditions in the capital markets to identify financing opportunities.
• Manages maintenance of liquidity required for variable rate debt.
• Coordinates debt funding of university capital projects, including health system projects.
• Leads the selection and supervision of investment bankers and trustees/paying agents to support the issuance of debt.
• Coordinates compliance for all university debt issues.
• Oversees external relationships with bond counsel, rating agencies, financial providers, and bond investors.
• Coordinates the issuance of long-term bonds and commercial paper, obtaining credit facilities, payment of debt service for bonds, commercial paper, and swaps, payment of trustee, rating agency, and facility fees, and transaction costs of debt issues.
• Coordinates the financing of capital projects by the State Building Authority.

Other responsibilities

• Management of the university risk management reserves.
• Daily cash management functions of bond issues, risk management reserves, investment fees, and capital calls of alternative investments.
• Monitoring of securities in technology transfer agreements.

General guidelines for debt financing

• The university borrows (typically through the issuance of tax-exempt bonds) money to finance construction cash flows or the acquisition of capital assets related to projects approved by the Regents, for which the university does not have specific cash reserves on hand.
• The university may also borrow using taxable bonds to finance operating cash flows and certain capital projects.
• The Regents of the University of Michigan, a constitutional corporation, has the authority to issue debt secured by revenues they control. (Article VIII, Section 5 of the Constitution of the State of Michigan.) Currently, General Revenues are pledged for new debt.
• The university utilizes tax-exempt commercial paper and public variable/fixed rate bonds to finance the capital projects of the university including the health system. For working capital needs and some capital projects, the university may utilize taxable commercial paper.
• To minimize the cost of financing, the university maintains some variable rate debt in its debt structure. Variable rate debt lowers the cost of borrowing but exposes the university to certain risks including volatility in the debt service of the university.
• The Treasurer’s Office regularly monitors interest rates in the market to determine what debt issues could be refinanced to lower the cost of borrowing.
• The university’s long term debt rating is AAA/Aaa (S&P Global Ratings/Moody’s Investors Service) as of first quarter 2019.