MIT borrows for the long run with a $750 million ‘century bond’

Chronicle of Higher Education : The usual term for capital borrowing by universities is 30 years, but MIT has issued taxable bonds it plans to repay over 100 years, writes Goldie Blumenstyk for the Chronicle of Higher Education. MIT will pay 5.62% interest on the so-called century bonds and plans to use the proceeds to finance projects in its MIT 2030 plan, which calls for renovations and several construction projects, including a new energy and environmental-studies building, a performing-arts center, and a nanotechnology fabrication center. Universities that borrow by issuing taxable debt often have to pay higher interest rates than they do on tax-exempt bonds, but the bonds allow the issuers more flexibility. The success of the MIT deal could fuel more interest in the use of century bonds by other universities, especially those that are treating debt as a permanent part of their financial management plans. Century bonds aren’t common, but MIT is not the first to issue them; Yale and Boston Universities did so in the mid-1990s, albeit for deals about one-seventh the size of MIT’s.