Howard $215 Million Bond Sale Sets Precedent for HBCU Financing
Howard University sold $215 million in bonds this week, a major financing tool that colleges and universities nationwide have utilized to support campus expansion and loan refinancing in the uncertain impact of COVID-19 regulations and revenue projections.
Bloomberg provides analysis on the sale, a portion of more than $27 billion in such transactions among higher education institutions but the only one posted by a historically black institution.
By many measures, the cards are stacked against Black institutions. They tend to serve lower-income students, which makes their balance sheets less robust and their endowments smaller — the sorts of things that may limit prospective bond buyers. No Black institution cracks the top-100 richest schools in the country and HBCUs average $15,000 per student in endowment funds, compared to $410,000 for similar non-HBCU schools, according to a 2018 U.S. Government Accountability Office report.
In 2016, a study found that historically black institutions paid more in bond issuing costs than other institutions and had to wait longer for investor engagement.
Unconditionally, underwriters collect about $8,050, on average, for every million dollars raised in the municipal market. However, for bonds issued by HBCUs, the underwriter’s share is $9,200. For a typically sized deal ($35 million), the total difference grows to about $40,000. We hypothesize that the high spreads HBCUs are charged reflect, in turn, high selling costs born by underwriters. Indeed, conversations with municipal bond traders (the original source of inspiration for this paper) suggest that bonds issued by HBCUs are particularly illiquid, or in industry parlance, “harder to place.”
Bloomberg’s journalists suggest that increasing racial tensions and corporate awareness of racial inequity may be spurring the investor interest in black college bond sales. Enrollment projections suggest that even in the midst of a pandemic, HBCUs are drawing higher levels of interest from prospective students, and could be emerging targets for large philanthropic gifts, such as the $120 million gift from Netflix CEO Reed Hastings, and municipal support, such as Florida’s investment in the state’s three private black colleges.
But what if there’s a simpler explanation? What if black colleges are realizing new levels of support simply because they are large businesses that are actually opening for business and likeliest to be able to pay back bond servicing costs? Businesses of all stripes and sizes, from municipalities to legendary retailers, are collapsing under the weight of social distancing and the disappearing need for brick and mortar operations.
But higher education is primed to be the booming business during the coronavirus hide-and-seek-a-vaccine recovery period. Millions of people may be looking to start or return to college for undergraduate and advanced degrees, credentialing, and for some, a reason to get out of the house.
If you are a lender with millions to burn and eyes on an industry poised to have high activity during a down economic period, wouldn’t you consider investing in colleges? And if you’re really daring, wouldn’t you consider schools that have historically been overlooked for investment and growth?
CIAA Considers Moving Fall Sports to Spring Semester
The Central Intercollegiate Athletic Association could see a truncated football season play out during the spring semester, according to one of the league’s most recognizable athletic directors.
Virginia Union University AD Joe Taylor told WRIC in Richmond about a proposal from member schools to the conference leadership requesting the move for all fall sports teams; a plan announced earlier today by the Ivy League.
The CIAA would not confirm details of the proposal or likelihood of its adoption.
Former Miss Hampton Javicia Leslie to Star as ‘Batwoman’
Hampton University alumna Javicia Leslie has been announced as the new lead character for CW superhero series ‘Batwoman.’
Leslie, who has starred in CBS’ ‘God Friended Me’ and BET’s ‘The Family Business,’ will be the first African American to play the superhero in film or television.
“I am extremely proud to be the first Black actress to play the iconic role of Batwoman on television, and as a bisexual woman, I am honored to join this groundbreaking show which has been such a trailblazer for the LGBTQ+ community,” Leslie said.
Leslie was crowned as Miss Hampton in 2007, and credited the Hampton network of alumni for her rise through the Hollywood ranks.
“My experience at Hampton was amazing and the networking that has followed me by being an alum is priceless. I went to an audition a few weeks ago and the writer was a Hamptonian. I’ve seen writers, directors, and other actors that are from Hampton. The Hampton connection is real and I just love that,” Leslie said.
More HBCU Fall Re-Opening Plans
Several additional HBCUs have announced plans for re-opening this fall.
