NEWS THAT MATTERS

No ‘quick fix’ for Queen’s debt: University may enter bond market

By Gloria Er-Chua, News Editor

Excerpt from: Queen’s Journal January 15, 2010

Full article at:
http://www.queensjournal.ca/story/2010-01-15/news/no-quick-fix-queens-debt/

Queen’s may soon sell bonds to help finance its debt from capital projects, University spokesperson for Vice-Principal (Finance and Administration) Caroline Davis told the Globe and Mail on Jan. 11.

Other Canadian universities, including the University of British Columbia and the University of Toronto, are also looking into the bond market as they face upcoming budget crunches. Universities lost an average of 18.5 per cent in endowment funds in 2008, the Globe and Mail reported. “Universities are desperate because of their expenses,” economics professor Frank Milne told the Journal. He said he thinks the provincial government’s emphasis on funding infrastructure in recent years has led some universities to spend large amounts of money on capital projects they’re now struggling to pay for.“They’re all in this situation,” he said. “There’s no quick fix.”

Queen’s is building a new performing arts centre, a medical building and the School of Kinesiology. The Queen’s Centre was finished last term and opened on Dec. 1. The University has raised $44 million for the Queen’s Centre, which cost $169 million.

Milne said the University can either take out a bank loan or sell bonds to make up the $125 million shortfall.
“They’ll do calculations and find the cheapest way to do it,” he said.

A bond is a financial instrument issued for a period of time to raise money through borrowing, he said. The issuer owes the creditor the principal amount as well as interest, usually paid in set intervals. The creditor doesn’t gain ownership rights.

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