University to raise up to $100m

Canterbury University wants to lift the number of undergraduate international students by about 1200. Photo / Christchurch Star

Canterbury University is to raise up to $100 million from retail investors to upgrade its facilities to attract international students.

Under the offer, the university will seek to raise at least $50 million through the issue of fixed-rate bonds and it may accept oversubscriptions up to $50 million.

It is the first retail bond issue by a New Zealand university and the first with a "philanthropic option" where investors can choose to forgo all or part of their interest and capital payment if they wish to extend further support to the university.

Vice-chancellor Rod Carr told the Business Herald the university believed it was "an important opportunity for New Zealanders to invest in New Zealand and research and education".

The money raised would largely be used to refurbish ageing science and engineering facilities.

"It will enable us to bring forward infrastructure development that we might have got around to, but it would have got done later. But also in our 10-year business plan is a deliberate commitment to grow the number of undergraduate international students by about 1200."

The university currently has about 1600 international students who mostly study business, science, and engineering.

"Those are the strengths we'll be building on. It's a known business for us that we're developing. From that point of view it's a moderate risk strategy."

Carr said the philanthropic option granted investors "a degree of flexibility without loss of control about the extent and the timing of any philanthropic endeavour they might want to pursue using the bond as the vehicle".

By raising the money, the university would go from being essentially debt free to having a debt to equity ratio of about 10 per cent.

The university was anticipating an increase in fee revenue as international student numbers rose, but it was capable of servicing the debt at current levels of income.

Investors will be paid 7.25 per cent interest for five years, with the rate then reset for a further five years, and be entitled to full repayment when the bonds reach maturity in 2019.

The offer is expected to open on October 12 and closes on November 30. Murray & Company and First NZ Capital are the joint lead managers.