04 February 2000
The £69.4m bond has been issued by Owengate Keele plc in return for a 30-year rental stream. Keele will gain £55.5m upfront, which will be used to refurbish the rooms, pay off debt and invest in academic courses and facilities.
Tim Short, securitisation official at Paribas, the lead manager of the bond, said that Keele's approach was unique in the UK.
'We would see this as distinct from a standard bond, because there is no obligation on the university to pay the money back. It is off-balance-sheet financing with substantial risk transfer,' he said.
He added that it was preferable to using the Private Finance Initiative, because there was no need to privatise the facilities management function. Under the bond scheme, ownership of the 2,936 rooms would also remain with the university.
Douglas Pinnock, a director of Owengate Securities, emphasised that there was no recourse to Keele if things went wrong. 'If this goes pear-shaped, there is no danger to the university,' he said.
Pinnock added that he was discussing using the same approach with a number of other universities.
'An awful lot of universities are interested, but they were all waiting for this one to close. This could be a solution to the long-term funding issues for universities.'
PFfeb2000
