Earlier today, MIT sold $750 million in Series B Taxable Revenue Bonds, maturing in 2111 and yielding 5.623%. The proceeds from these bonds will be used to support MIT’s ongoing campus development program, including academic and research capital projects within the MIT 2030 framework.
Bond financing is a type of lending under which investors purchase IOUs from the borrowing institution, in this case MIT, which commits to pay back the original loan plus a set interest rate by a certain date. MIT’s “century bonds” are set to mature 100 years from now. Investors, which can include individuals as well as pension and mutual funds, receive regular payments over the life of the bond.
MIT 2030 is a framework for determining future needs of the campus with regard to both renovation and the establishment of infrastructure for emerging areas of research and community use. The proceeds from the bonds, combined with gifts and internal funding sources, will provide MIT with flexibility in scope and timing to support the acceleration of campus renewal as well as other strategic research buildings and infrastructure projects over the next decade.
MIT views this offering as locking in a historically low cost of capital for a very long period of time, while at the same time providing an effective hedge against inflation.
The bonds were given Aaa and AAA ratings by independent credit-rating agencies Moody’s and Standard & Poor’s respectively, reflecting the highest possible stability forecast. MIT is seen by these agencies as a low-risk investment due to its status as an elite research university and history of strong financial performance, including fundraising and revenue diversity.
Series B notes are unsecured general obligations of the Institute and are callable prior to their scheduled maturity through a “make-whole” provision.
Barclays Capital led the financing, with JP Morgan and Morgan Stanley as co-bookrunners.
In the coming decade, projects involving MIT’s Lincoln Laboratory campus and the Cambridge real estate holdings in MIT’s investment portfolio will be financed separately with structures appropriate to those projects.