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University of Connecticut Bond Issues
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Debt Service
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The State General Fund pays the debt service on the University’s General Obligation Debt Service Commitment Bonds. The University pays the
debt service on the Special Obligation Student Fee Revenue Bonds from its own resources. For all the UCONN 2000 General Obligation Debt
Service Commitment securities issued since the program’s inception in 1996 to April 1, 2005 (including the GO-DSC 2005 Bonds but
net of refunded debt) debt service totals $1,490.9 million, representing 1,004.4 million of principal
and $486.5 million of interest (including capital appreciation bonds).
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As of April 1, 2005 there will be total debt service remaining of $1,085.6 million, representing $772.7 million
of principal and $312.9 million of interest (including capital appreciation bonds).
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For the Fiscal Year Ending June 30, 2004 the Debt Service Commitment paid for the University’s General Obligation Bonds amounted to $67.5
million (representing $42.9 million of principal and $24.6 million of interest).
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UCONN 2000 Special Obligation Student Fee Revenue securities debt service amounts to
$392.6 million, representing $205.1 million of principal and $187.5 million of interest
over the course of the maturity spectrum, net of pre-refunded and defeased bonds. As of
April 1, 2005 debt service remaining totals $338.5 million comprising $191.4 million of
principal and $147.1 million of interest (including capital appreciation bonds).
All other things equal, the Special Obligation
bonds incur proportionally more interest expense because they are
generally issued for terms of up to thirty years compared to twenty years
for the Debt Service Commitment bonds.
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For the Fiscal Year Ending
June 30, 2004 the University paid from its own resources Special Obligation
Bond debt service of $13.2 million (representing $3.8 million of principal and $9.4 million of interest).
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UCONN 2000 Bond Proceed Investments
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The investment of Tax-exempt bond proceeds is heavily regulated by the Internal Revenue Service, the relevant Indentures of Trust with
bondholders, Connecticut law, and other regulatory mechanisms. In addition to meeting those requirements, the University’s general
investment policy is to balance an appropriate risk-return level, heavily weighted towards safety of assets, with estimated cash flow
needs and liquidity requirements. The University is also mindful that the rating agencies, bond buyers, and bond insurers often weigh
the quality of an issuer’s investment portfolio.
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Bond Proceeds form part of the Trust Estate established with the Trustee Bank as security for bondholders. To date, the University has
directed the Trustee Bank to invest any Debt Service Commitment construction fund proceeds in the State Treasurer’s Short Term Investment
Fund (“STIF”) which is “AAA” rated and offers daily liquidity and historically attractive risk-adjusted yields. The State Treasurer’s Office
wishes to hold and invest the University’s General Obligation Bonds Debt Service Commitment funded Costs of Issuance account, a much smaller account.
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The General Obligation Debt Service Commitment Refunding Series 2004-A proceeds, other than the costs of issuance, are held
by the Trustee Bank in an irrevocable escrow fund, which is invested in the U.S. Treasury State and Local Government
Securities ("SLGS") and cash pursuant to the Escrow Agreement.
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The University has directed the Trustee Bank to invest all the Special Obligation new money bond proceeds in dedicated STIF
accounts, with the exception of the 1998 Special Obligation Special Capital Reserve Fund which is invested in longer term "AAA" rated
federal agencies’ fixed income Investment Obligations as defined in the Special Obligation Indenture of Trust.
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The Special Obligation Student Fee Revenue Refunding Series 2002-A proceeds, other than the costs of issuance and debt service accounts
that are invested in STIF, are held by the Trustee Bank in an irrevocable escrow fund, which is invested in U.S. Treasury State and
Local Government Securities (“SLGS”) and cash pursuant to the Escrow Agreement.
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UCONN 2000 Bond Proceed Investment Earnings
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The University's General Obligation Debt Service Commitment bond proceeds investment earnings are retained by the State Treasurer’s Office
and do not flow to the
University or to the Trustee Bank.
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The University's Special Obligation bond investment earnings are part of the Pledged Revenues and are directly
retained by the Trustee Bank to pay debt service on the bonds, and may also be used to flow to other Trustee bond accounts, if
necessary, pursuant to the Indenture of Trust.
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Fiscal Year End June 30, 2004 UCONN 2000 Special Obligation Student Fee Revenue Bonds investment earnings amounted to approximately
$168.8 thousand (cash basis).
The investment earnings on the Special Obligation Student Fee Revenue Series 2002-A Refunding Escrow Account flow to the irrevocable
escrow and are used by the Trustee Bank to meet debt service payments on the defeased bonds.
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Similarly, investment earnings on the General Obligation Debt Service Commitment Series 2004-A Refunding Escrow Account flow to an
irrevocable escrow and are used by the Trustee Bank to meet debt service payments on the defeased bonds.
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Future UCONN 2000 Debt Issuance
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The passage of 21st Century UConn provides for $1.3 billion of University General Obligation bonds backed by
the State's Debt Service Commitment to be issued during Phase III. The first $50 million of Phase III, along with the last $50 million
of Phase I&II was issued on March 16, 2005. The University anticipated offering a Debt Service Commitment Bond issue during fiscal
year 2006 to fund an expected $79 million of UCONN 2000 Projects.
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Additionally, the University could issue Special Obligation Revenue bonds for certain projects that have a financial self-sufficiency
capacity, and/or if aggregate pledged revenues are sufficient to meet requirements of the Special Obligation Indenture. Market
conditions and other factors might also lead to issuance of either General Obligation or Special Obligation refunding bonds in
the future.
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Finally, the University may enter into other types of tax-exempt or taxable debt pursuant to the UCONN 2000 Act.
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