Relevant Documents:NoticePreliminary Official Statement (Series P)Official Statement (Series P)Official Statement (Series N)Updated Annual Report
The University of Hartford entered the current fiscal year with a 0.38x long-term debt service coverage ratio and hired Longhouse Capital Advisors to make recommendations to reach the 1.1x DSCR covenant under the Series N and Series P revenue bond documents issued on behalf of the institution by the Connecticut Health and Educational Facilities Authority, according to a notice and fiscal 2022 annual reports posted to EMMA.
The postings include a Wednesday, Jan. 18, notice of corrections to the preliminary and official statements for the $25.5 million in University of Hartford Series P revenue bonds issued in July 2022. The notice also discloses that the university was amending and restating in its entirety its annual report for fiscal 2022 ended June 30. The restated financials were also posted on Jan. 18, replacing the original report that was posted on Dec. 1, 2022.
The original and amended fiscal 2022 reports reflect $3.02 million available for debt service on maximum annual debt service of just under $8.04 million.
The notice corrects certain projections of its expenses and DSCRs for fiscal 2022 as included in the preliminary official statement and the official statement for the Series P bonds. Both statements contained calculation errors for certain projections of expenses and, as a result, the projected long-term DSCR. The errors were discovered in the course of preparing the calculation of the actual long-term DSCR requirement as of June 30 for the annual report based on the audited financial statements of the institution and as required by the loan agreements, according to the notice.
The university says it believes that (i) the projections and calculations were erroneously made using the institution’s budgeted expenses rather than its year-to-date actuals available at the time of the publication of the statements and (ii) certain instructional, student services and general institutional expenditures related to restricted funds totaling approximately $10.87 million were also erroneously omitted from such projections and calculations.
Had year-to-date actuals been used, and had such expenses been included in the projections for fiscal 2022, the projected amount available for debt service would have been $626,000 instead of $11.49 million and the projected DSCR would have been 0.07x instead of 1.43x (and 0.07x instead of 1.22x in footnote 3).
“Notwithstanding the corrections to the projections” that appeared in the offering statements as described above, “these projected amounts are superseded” by the actual amounts included in the annual report, calculated based on the audited financial statements for fiscal 2022, according to the notice. The actual long-term DSCR as of June 30 was 0.38x, as reflected in the original and restated fiscal 2022 annual reports.
Pursuant to the loan agreements for the Series N and Series P bonds, the institution has retained Longhouse Capital Advisors to make recommendations “to increase the long-term DSCR to 1.10x, or, if in the opinion of the consultant the attainment of such level is impractical, to the highest practical level,” according to the notice.
According to the loan agreements, so long as the institution retains a consultant and the institution follows the consultant’s recommendations, the long-term DSCR requirement will be deemed to have been complied with even if the long-term DSCR for any subsequent fiscal year is below the required level of 1.1x. However, if the DSCR for any subsequent fiscal year is less than 1x, an event of default will be deemed to have occurred.
As of June 30, the institution was in compliance with the requirement of a ratio of at least 50% of cash and investments to debt with a ratio of 145.8%.
The Series P bonds and $132 million Series N bonds are special obligations of the issuing authority and are payable solely from the revenue paid to the authority or the trustee by the University of Hartford, a private university in West Hartford, Conn.