University launches bond issue

Rod Carr
Rod Carr
Less than a year into the job, University of Canterbury vice-chancellor Rod Carr is stamping his commercial experience firmly on university activities.

The university this morning launches a $100 million listed philanthropic bond issue, which it says is the country's first bond of its type.

Dr Carr said in an interview that the issue was an exciting opportunity for New Zealanders to make a direct investment in education infrastructure, and help the university progress from being a high-quality institution to one that could call itself host to a world-class learning environment.

Dr Carr became vice-chancellor in February.

Previously, he was managing director of Jade Software Corporation.

Before joining Jade in 2003, he was deputy governor and director of the Reserve Bank.

He has LLB(Hons) and BCom(Hons) degrees from the University of Otago.

He was instrumental in launching the Bank of New Zealand's trust group in 1987 and a global index bond in the early 1990s.

In the next 10 years, the university planned to invest as much as $500 million in developments such as building refurbishments, new buildings, ICT infrastructure and alternative technologies to develop a world-class learning environment, attracting outstanding scholars from across the spectrum of academic disciplines.

"We need to promote a learning environment that attracts people who have the desire and potential to make a difference. We owe it to our children and grandchildren to do all we can to stop what I fear could become the great brain robbery," he said.

Increasing numbers of universities in Australia, India and China were not only better equipped than New Zealand, they were investing substantially more in support of their teaching and research, Dr Carr said.

The university's ambition to realise its potential was constrained, despite the funds it retained from grants and fees for teaching and research, and one-off grants from the Government and donors.

"This bond issue, the first by a New Zealand tertiary institution, aims to secure additional resources for the world-class teaching and research facilities that will enable the acceleration of the current investment plan."

Of the $500 million capital development planned by the university, it could fund $350 million from its operating profit.

The bond issue could raise another $100 million.

That would take the university's debt to equity ratio from zero to 12%.

Taking money from people in the current economic climate was hard, and there was not a great philanthropic community in New Zealand, he said.

The only approach seemed to be "this is a stick-up, give us your money".

The bonds gave people the opportunity to invest with the university and, if they wanted to, they could lessen the burden by reducing the interest requirements to zero for some or all of their bonds.

That reduced burden on the university would enable it to fulfil its capital works programme sooner, Dr Carr said.

During the term of the bond, investors would be invited to consider donating part, or all, of the sum owed on maturity.

The university would continue to pay the investor interest on the bond principal they had donated, if they so elected.

"This optional philanthropic element of the bond issue will allow investors to direct their support to higher education, while tailoring their contribution in light of their own circumstances, which may change over the term of the bond."

The offer opens today and closes on November 30.

Murray and Company and First New Zealand Capital are the joint lead managers.

Dr Carr said the bond met all security requirements and should appeal not only to New Zealanders but to overseas investors who could follow their money into New Zealand.

Many of those investors had an interest in research and teaching.

dene.mackenzie@odt.co.nz


At a glance
- Ten-year, unsubordinated, unsecured, fixed-rate bond with philanthropic options.

- $50 million with an ability for oversubscriptions of another $50 million.

- Rate is 7.25% for the first five years, then reset at a margin of 1.75% over the then prevailing five-year swap rate.

- Listed on the New Zealand debt market.

- Bond owners can make a charitable gift of bond principal to the University of Canterbury Foundation.


Add a Comment