The school is enjoying one of the perks of having triple-A credit.
The University will sell up to $573 million in revenue bonds through a state agency, use the proceeds to refinance outstanding debt, and sell $500 million in taxable bonds for “corporate purposes,” according to a report from Moody’s Investors Service this week.
University spokesperson Jason A. Newton wrote in an email that the transactions constitute “active financial management designed to lock in lower rates.”
Harvard to Issue $1.1 Billion in Bonds, Capitalizing on Low Interest Rate, The Harvard Crimson
Read more of how Harvard is surviving the pandemic.
Harvard University Taps Credit Market for Up to $1.1 Billion, Bloomberg
Coronavirus Causes ‘Precipitous Drop’ in Harvard’s Executive Education Revenues, The Harvard Crimson
By the way, many companies are not so fortunate, are fully levered, and might not survive the coming liquidity crisis.
Given that their bank credit lines are already full, the effective closure of the main sources of liquidity for lower-rated companies leaves only one plausible private-sector source for these companies: private capital investors, specifically distressed debt funds, private equity, private debt funds, and hedge funds. These investors have plenty of money available — about $1 trillion in cash waiting to be invested. But in the current circumstances, with the debt of many highly leveraged companies trading well below par, investment by these players will likely entail some form of capital restructuring. This can be a complex process, requiring extensive due diligence and involving negotiation among many parties. As a result, investors may not be able to provide liquidity quickly enough to meet the timing of many borrowers’ needs.
The bottom line is that without a meaningful government intervention, a very large number of highly leveraged companies will almost certainly be forced into free-fall bankruptcy as a direct result of the pandemic, even though there is plenty of cash in the financial system that could tide them over.
Managing the Liquidity Crisis, Harvard Business Review
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Post by Marcelino Pantoja