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houseface2000

Oxford University first bond issue

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Oxford university are raising fiance for the first time with a £750 million 19 year bond issue . I believe council will follow suit. What implications will this have on supposed debt deflation just round the corner??

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Oxford University is extremely wealthy, with an investing horizon measured in centuries. The administrators are presumably not idiots (although seeing how other universities' senior administrators have behaved, that is no longer assured).

I do not know how liquid their current assets are, so it is an interesting development if they feel the need to acquire a large, cash, war-chest. Obviously borrowing costs will be low for them (and the investors will not lose out nominally), but it still bears reflection.

My guess would be that this is consistent with durhamborn's hypothesis that there will be a debt-fueled asset-price deflation, followed by a reflation. It may not be sensible for an individual to buy southern property in the deflation, because it is not clear when the knife will stop falling, but a Medieval institution looking over a time horizon of a hundred years may see things very differently.

If they see a reflation following that, then they also get to repay the debt in devalued pounds.

If anyone has an alternative hypothesis consistent with the observations, I'd be very interested to hear it. I'm also waiting to hear whether Cambridge do the same thing.

If the council follows suit, it would presumably be for a different reason, unless they are planning to acquire land for council houses.

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I work for the university and they stated the borrowing was to invest in education, research and to insure the university remained one of the best in the world. The bond is to repaid in 2027 my question is with what??

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56 minutes ago, Toast said:

If anyone has an alternative hypothesis consistent with the observations, I'd be very interested to hear it. I'm also waiting to hear whether Cambridge do the same thing.

The only real observation we have is that Oxford is doing this for the first time ever: https://www.ft.com/content/a827249c-d6aa-11e7-a303-9060cb1e5f44 (google 'Oxford university raises £750m with 100-year bond')

Quote

The 100-year-bond, which was launched earlier this week, was increased in size to £750m from £250m, and attracted close to £3bn in potential investment.

The ultra-long dated deal came with an annual coupon of just 2.5 per cent — lower than the rate implied by initial pricing expectations, and just 85 basis points above a UK government bond maturing in 2068.

Quote

Oxford, which dates from the 11th century, plans to use the proceeds for long-term strategic projects and to further the academic mission of the university

It's (a quarter of a percent off) the lowest IRs have been in 3 centuries or so, and they're borrowing almost as cheap as the government. The only thing that seems pretty obvious is that they believe that they can get better returns on £750m than 2.5% over 100 years.

Building up a war chest to buy assets after a crash looks feasible, whether that's in a delfationary crash, or one caused by IRs continuing to rise. They must have some allocated to fund commercial spin offs from IP, with equity for the university fund.

Edited by Guest

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37 minutes ago, highYield said:

The only thing that seems pretty obvious is that they believe that they can get better returns on £750m than 2.5% over 100 years.

It's certain to work out for the University, unless they set fire to the cash. It's the investors who are the idiots (presumably including me, via my pension).

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Just now, Toast said:

It's certain to work out for the University, unless they set fire to the cash. It's the investors who are the idiots (presumably including me, via my pension).

They could also Build to Rent on tiny bits of the enormous tracts of land they own, for the students they have to live in - which would be logical after all; they have lots of land, and lots of students.

In that case, wouldn't like to be an Oxford student leveraged BTLer.

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15 minutes ago, highYield said:

They could also Build to Rent on tiny bits of the enormous tracts of land they own, for the students they have to live in - which would be logical after all; they have lots of land, and lots of students.

In that case, wouldn't like to be an Oxford student leveraged BTLer.

Dont Oxford offer really cheap accomodation, if a bit unheated?

Probably  a no brainer for Oxford. Hopefully some will go into student accomidation. Oxfird does have the land - they oukd build a student or lecturers village 5-10 miles out and run a light railway to the centre.

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Directors will take £10million bonus each, blow the rest on hookers and coke! When it all collapses claim they had never seen it coming, get some £2million gold plated pensions and the tax payer will bail them out!

Its standard practice these days! Legalised theft is rife in Academies so why not! 

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9 hours ago, Haddie said:

Word on the street it' for student accommodation. 

Of course it is. Can't go wrong with properdee especially when you have a captive audience to fill it for £100 a week and the governbankment  to pay it.

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3 hours ago, GreenDevil said:

Of course it is. Can't go wrong with properdee especially when you have a captive audience to fill it for £100 a week and the governbankment  to pay it.

Oxford Uni, with a borrowing for 100 years fixed at 2.5% probably cannot.

However, outside of the Russell Group, and borrowing variable rates they probably will.

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The amount  of wine that the university's  keep  in stock at any given time is fearsome. Would put Lathwaites  to shame..

Some hae meat an canny  eat sort of thing.

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Sounds like a sensible thing to do, to me.

Their income is fairly assured over the timescale -- even if HE collapses, Russel Group will be fine.

 

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On 12/4/2017 at 8:07 PM, houseface2000 said:

The bond is to repaid in 2027 my question is with what??

The intention is of course, as with any gov or muni bond, to never repay, but to rollover to infinity and simply hope the best.

Edited by Silverfinger

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On 04/12/2017 at 10:17 PM, Haddie said:

Word on the street it' for student accommodation. 

Ah, thank you for that: it definitely makes sense to build on land they currently own, for students or lecturers, even if market conditions stay unchanged. I was thinking their move might forebode some kind of financial collapse which the the clever minds at Oxford can see and take advantage of. However, in fact, it's just the same strategy that other Universities (with no reputation for containing clever minds) are pursuing. Due to Oxford's wealth and status though, it will work out for them (in contrast to some of the other institutions).

As for Cambridge: they're already building a new town for the lecturers, so a couple of years ahead of the competition.

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On 05/12/2017 at 10:56 AM, Haddie said:

The amount  of wine that the university's  keep  in stock at any given time is fearsome. Would put Lathwaites  to shame..

Some hae meat an canny  eat sort of thing.

I think they get through the wine at a fair old pace. The advantage of being an institution with a centuries long time-frame and a taste for fine living, is that you can buy wines for the cellar, and so always drink great and well-aged vintages, at a (relatively) low cost.

In Cambridge, some of the streets in the middle of town are really just the roofs of the college cellars. If things really go to pot, steal a pneumatic hammer and a ladder from somewhere and go and visit the old university cities.

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55 minutes ago, Toast said:

Ah, thank you for that: it definitely makes sense to build on land they currently own, for students or lecturers, even if market conditions stay unchanged. I was thinking their move might forebode some kind of financial collapse which the the clever minds at Oxford can see and take advantage of. However, in fact, it's just the same strategy that other Universities (with no reputation for containing clever minds) are pursuing. Due to Oxford's wealth and status though, it will work out for them (in contrast to some of the other institutions).

As for Cambridge: they're already building a new town for the lecturers, so a couple of years ahead of the competition.

Cambridge have just got another 80m from Dolby.

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On 12/5/2017 at 2:16 PM, dgul said:

even if HE collapses, Russel Group will be fine

Well, with whose money?

If we assume that universities provide the value-adding service of education, how do they compete with the Internet, which provides almost the same value, but is almost free?

Once the State loses the ability to prop up its brainwashers, they will find that the free market is nowhere near as generous to parasites as the government.

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On 12/4/2017 at 7:07 PM, houseface2000 said:

I work for the university and they stated the borrowing was to invest in education, research and to insure the university remained one of the best in the world. The bond is to repaid in 2027 my question is with what??

Stardust.;)

 

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1 hour ago, Locke said:

Well, with whose money?

If we assume that universities provide the value-adding service of education, how do they compete with the Internet, which provides almost the same value, but is almost free?

Once the State loses the ability to prop up its brainwashers, they will find that the free market is nowhere near as generous to parasites as the government.

Well, based on an assumption that there'll always be some demand, and it'll drop off from the poorest quality provider first.  So even if demand drops down to 5% of the current demand, everyone else will fold and Russel group will be left as the supplier.

I suppose you could think that the internet could do all the provision, but that ignores the 'gentleman's club' part.

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15 hours ago, dgul said:

Well, based on an assumption that there'll always be some demand, and it'll drop off from the poorest quality provider first.  So even if demand drops down to 5% of the current demand, everyone else will fold and Russel group will be left as the supplier.

I suppose you could think that the internet could do all the provision, but that ignores the 'gentleman's club' part.

They need a business model, right? I understand what you're saying with the gentleman's club thing, however, I don't think universities will necessarily be the ones to provide that service. 

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39 minutes ago, Locke said:

They need a business model, right? I understand what you're saying with the gentleman's club thing, however, I don't think universities will necessarily be the ones to provide that service. 

You might be right.  I suppose it is low risk for them -- either I'm right and it is a safe bet, or you're right and they're pretty much going bankrupt anyway.  Either way they don't have to worry about the debt they're taking on.

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  • 407 Brexit, House prices and Summer 2020

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      • down 5% +
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      • up 5%



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