Buck Institute for Research on Aging $126,415,000 Federally Taxable Financing (Series 2020)
November 7, 2020
|Cain Brothers served as the Sole Manager in the public issuance of $126,415,000 of taxable fixed rate revenue bonds on behalf of the Buck Institute for Research on Aging (the “Institute”). Now in its twenty-first year of operations, the Institute, located in Marin County, CA, is the world’s first biomedical research facility focused solely on research on aging. The work of the Institute’s scientists revolves around identifying and disrupting the pathways activated by the aging process that trigger the development of chronic disease.
The Series 2020 Bonds (the “Bonds”) proceeds were used to advance refund $80.4 million of outstanding, higher interest rate Series 2014 Bonds and fund $26.3 million of various capital improvements on the Institute’s campus and working capital. The Bonds are insured by Assured Guaranty Municipal Corp. (“AGM”) and have been assigned an insured “AA” rating (stable outlook) by S&P. The Institute also maintained its underlying “A+” (stable outlook) S&P rating (first assigned as part of Cain Brothers’ structuring of the Series 2014 Bonds).
The Institute is a recipient of an annual distribution (part of the gross revenue pledged to bondholders) from the Leonard and Beryl Buck Foundation (the “Buck Trust”), which has its own “AA-” (stable outlook) issuer credit rating from S&P and a value of approximately $900 million. The Buck Trust distribution is the key component to the Institute’s financial profile, and Cain Brothers structured a unique covenant package where annual debt service and overall debt capacity are tied to the annual distribution.
Despite a volatile and rising interest rate market, the Institute was able to reduce annual debt service as a result of favorable interest rates and extended amortization, thereby creating the debt capacity to fund campus improvements. The offering had strong investor interest from bond funds, hedge funds, and insurance companies. The taxable nature of the Bonds allows more flexibility in using the bond proceeds for working capital and assets with shorter useful lives, both of which are more challenging with tax-exempt debt. The financing is an instrumental first step in using a combination of debt and philanthropy to execute an exciting strategic vision for the Institute.