Corporate Bonds
“The demand for universities to borrow over a long term is exactly matched by the desire for investors to find places to put long-dated sterling debt.” – Sarah Seed, The Guardian (2014)
A corporate is issued by a corporation in a bid to raise financing for a variety of reasons. In the case of a university, this will be for expanding and maintaining infrastructure, financing operations and research projects.
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In layman terms, this is a loan. The university issues a bond to institutional investors on the Uganda Securities Exchange. Each bond obligates the University to pay the bondholder the principal amount of the bond when it reaches its maturity date and to pay a fixed interest rate through the life of the bond.
Given their long term certainty, Universities stand a good chance at issuing corporate bonds. However, they are curtailed by their non-profit model of business. In Britain, University of Cambridge and University of Manchester issued public bonds in 2014, worth £ 350 million and £ 300 million, respectively. Through corporate bonds, universities are capable of raising a large amount of capital over a long period at a low fixed cost.
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