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7 Debt Policy Board Presentation

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					          FINANCE & HUMAN RESOURCES
                      Debt Policy

          Debt Policy Statement
• Maintain a debt rating that ensures
  – adequate funding for capital projects
  – provides ready access to the capital markets
  – at attractive rates relative to market conditions
    then existing
• Board of Curators sets policy
• President implements policy
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           FINANCE & HUMAN RESOURCES
                      Debt Policy

Goals of Issuing Debt
• to provide cost-effective funding for acquiring or
   replacing long-lived capital assets;
• to match the cost of funding with the benefits
   received over the useful life of capital
   improvements;
• to leverage other capital funding sources, such
   as preserving cash for building financial
   flexibility and funding short
• as needed, to meet short-term operating or
   emergency cash flow needs.
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            FINANCE & HUMAN RESOURCES
                          Debt Policy

Debt Capacity and Capital Planning
• determine University debt capacity pursuant to
  target debt ratings
• maintain a credit rating in the AA category or
  above
• Benchmark ratios:
  –   Unrestricted Financial Resources to Direct Debt
  –   Actual Debt Service to Operations
  –   University System Debt Service Coverage
  –   System Facilities Debt Service Coverage
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            FINANCE & HUMAN RESOURCES
                         Debt Policy


• Use of Long-Term Funding
  – To fund long-term projects
  – Tax exempt debt


• Use of Short-Term Funding
  –   primarily capital project notes or commercial paper
  –   for short-term funding needs, such as working capital
  –   investing cash most efficiently
  –   providing interim funding for capital projects
                                                          4
         FINANCE & HUMAN RESOURCES
                     Debt Policy

• Use of Off-Balance Sheet Financing
  – To share risk
• Use of Derivatives
  – To reduce interest rate risk
• Use of Floating-Rate versus Fixed-Rate
  Debt
  – limit floating-rate debt to a maximum range of
    30% to 50% of outstanding debt

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           FINANCE & HUMAN RESOURCES
                          Debt Policy


• Debt structure
  – collateral, maturity, refunding, interest rates,
    redemption, credit enhancement
• Methods of sale
  – Negotiated
  – Competitive sales
  – Private placement
• Taxable debt
• Reporting
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posted:11/19/2011
language:English
pages:6