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UConn 2000 bonds a big hit with investors
(April 5, 1999)
he basketball court wasn't the only place where Connecticut scored a "first" last Monday. It was also the first time in state history, says the State Treasurer's office, that a State of Connecticut secured bond issue was sold completely to retail investors.
The State Treasurer's Office opened a two-day retail order period for $80 million in UConn 2000 bonds March 26, in advance of a planned sale in the institutional market. By the time the retail order period closed March 29, the bonds were totally sold out, eliminating the need to go to the institutional market. It is the first time that a State of Connecticut secured bond issue has been sold entirely to retail investors.
UConn 2000, a $1.25 billion, 10-year state program of investment in the University's physical infrastructure, is the most ambitious publicly financed university infrastructure program in the country.
The 1999 Series A UConn General Obligation Bonds are the fourth issuance in the first phase of the program, which began in 1996.
Throughout the UConn 2000 program, the state has traditionally made bonds available in the retail market in advance of institutional pricing.
A retail purchaser is defined as a Connecticut resident. The bonds are exempt from federal income tax and Connecticut state income tax for most Connecticut residents. The bonds, made available to investors through investment banking companies, sell in denomination s of $5,000, and the maximum a retail purchaser could buy was $500,000.
Wilbur Jones, vice president for business affairs and finance, said the bond sale is a clear indication of the level of enthusiasm for the University among state residents.
"It's rare, if ever, to have an entire issue of that size being sold retail," he said.
Jones added that selling predominantly to retail customers also benefits the state by lowering the rate of interest and reducing the amount of debt service the state must pay.
"We saw a very strong response from individual investors," said State Treasurer Denise L. Nappier.
"This unprecedented level of retail purchases demonstrates investor confidence both in the bonds as an investment and in the University as an institution. UConn really had the numbers the past few days, in the tournament and in the market," she said.
Due to strong orders for the bonds, especially in the shorter maturities, the Treasurer's Office last week restructured the maturities to meet the demand. The bonds made available to investors included maturities from one to 20 years.
Orders were taken in all 20 maturities (2000 through 2019) during the opening day of retail orders alone, and a total of $92 million in orders was taken in during the two days, with 13 maturities oversold. The senior manager for the sale was Advest Inc.
"We worked very closely with officials at the University and with our financial team," Nappier said. "As with the Huskies, ours was a real collaborative effort that paid off with record-setting returns."
The bonds received underwriters' ratings of A1 from Moody's Investors Service, AA from Standard & Poor's Rating Group, and AA- from Fitch Investor Service. The 2010 through 2019 maturities were also AAA rated.
The UConn 2000 General Obligation series includes bond issuances of $99,520,000 in 1998, $124,392,431 in 1997, and $83,929,714 in 1996. Overall retail orders exceeded 100 percent of this year's issue, eclipsing the performance of prior bond issues.
This bond issue marks the completion of the first phase of the UConn 2000 project.
The state legislature authorized $382 million in bonds during the first phase and $580 million for the second phase, which runs through fiscal year 2005.