ANU Looks toward Raising $100 million through CPI Indexed Bonds. (September 22, 2004)

    The Australian National University (ANU) yesterday announced it is looking into issuing $100 million worth of CPI indexed annuity bonds. It is starting on a "road show" to judge demand for such an issue and will meet potential investors in Sydney, Melbourne and Brisbane starting September 22. Should the bond issue proceed the $100 million will be used for upgrading the university's infrastructure.

ANU is rated double-A plus with a stable outlook by Standard & Poor's.

Westpac Institutional Bank has been appointed as lead manager and Westpac's Peter Bloomfield, said the bank had been in talks with ANU for at least a year.

Robert Verlander, Commonwealth Bank's head of securities origination, told The Australian's Louise Perry "there were only a few universities in Australia with good enough financial standing to use inflation-indexed bonds." ANU is without debt and has assets of more than $1billion. That would seem to make it an attractive and secure proposition for investors. On the other hand knowing the very conservative outlook of Australia's investors it could be a hard sell locally, but may be an attractive investment overseas, particularly in the US with its current very low interest rates.

As Perry points out, "Inflation-indexed bonds are a way for investors to lend money to a borrower - in this case the university - in return for an annual interest payment. If inflation rises, the rate of interest paid by the university to bond-holders is also increased. When the bonds mature, (ANU's have a 20 to 25-year life) investors receive their original stake back in full," and if the bonds are seen to be good value there ought to be little difficulty in trading them on the market.

In conjunction with its "road show" ANU will release on Friday the results of a quality audit which will include an internal self-review process, a peer review process and deliberation by a quality review committee, which has made a number of recommendations to the university.

It is now apparent that the announcement by ANU's Vice-Chancellor, Ian Chubb, in January this year of a far reaching review of the quality of ANU's research and teaching was part of an overall strategy to bring ANU into the top echelon of world research universities begun well over a year ago. By comparison the additional money that would have been realised by ANU had it opted to raise its HECS fees up to 25% would have been small beer.