University of Hawaii generates $8.3 million in debt service savings through successful bond refinancing

University's financial strengths also recognized with an upgrade in credit ratings

University of Hawaiʻi
Carolyn Tanaka, (808) 956-9803
Mia Noguchi, (808) 956-9095
External Affairs & University Relations
Posted: Oct 2, 2006

HONOLULU — The University of Hawaiʻi successfully sold its Series 2006A University Refunding Bonds on September 28, 2006. The Series 2006A bonds generated approximately $8.3 million in debt service savings ($6.9 million in present value terms). The Series 2006A bonds refinanced a portion of the university‘s outstanding Series 2002A financing, which was the original funding mechanism for the John A. Burns School of Medicine (JABSOM).

In addition, the bond offering was structured to match the State‘s projected proceeds from its settlement agreement with tobacco companies, which are pledged for payment of the debt service on the Series 2002A and Series 2006A bonds.

Investor demand for the offering was solid and Hawaiʻi retail investors expressed strong interest, accounting for close to $10 million of the total orders placed for the transaction. UBS Investment Bank served as senior manager for the Series 2006A bonds.

"We appreciate the support of the Governor and the Department of Budget and Finance in our successful effort to refinance the JABSOM Bonds and save significant dollars for both the university and the state," said UH Board of Regents Chair Kitty Lagareta.

As part of the financing, the university requested underlying ratings from each of the three rating agencies currently monitoring the university‘s credit. Moody‘s Investors Services upgraded the university to an Aa3 from an A1, while Standard & Poor‘s and Fitch Ratings reaffirmed their confidence in the university by rating the upcoming bonds at an A+. Fitch also upgraded its outlook from "stable" to "positive." Bonds rated in those categories are judged to be of a high quality by all standards.

The ratings follow a series of update meetings held between the rating agencies and top university officials in July. At that time, university officials briefed the rating agencies on various aspects of the academic program, capital program, strategic goals and financial performance of the university.

The rating agencies lauded the strong management policies and financial performance executed by the university system administration. Rating analysts further cited stability in management and prudent long-term strategic goals as credit strengths.

In a press release, Moody‘s states that "stabilizing senior management after a period of turmoil has enabled a renewed focus on strategic initiatives and relationship building with the state." Standard & Poor‘s echoed the strengths of the university‘s "good financial performances, current levels of state support, and growth in its research activities" and added that they "anticipate a successful capital campaign effort and steadying of enrollment and applications." Similarly, Fitch Ratings states that the positive rating outlook "is attributed to an increase in research funding, management changes with a focus in planning on greater revenue diversity and a stronger state economy."

"I‘m gratified to receive this external recognition from the capital markets of our success in acquiring more resources to finance the hopes of the people of Hawaiʻi and to provide responsible stewardship of those resources," said UH President David McClain.


Established in 1907 and fully accredited by the Western Association of Schools and Colleges, the University of Hawaiʻi is the state‘s sole public system of higher education. The UH System provides an array of undergraduate, graduate, and professional degrees and community programs on 10 campuses and through educational, training, and research centers across the state. UH enrolls more than 50,000 students from Hawaiʻi, the U.S. mainland, and around the world. For more information, visit .