Harvard Plans $1.65 Billion Debt Financing Amid Donor Turmoil

Harvard announced it is exploring a $1.65 billion bonds sale in an attempt to raise capital through debt financing despite poor macroeconomic conditions, a move that comes after the University faced months of donor backlash.

The potential ten-figure bond sale, revealed in a University filing on Monday, would see Harvard’s debt reach $7.85 billion — higher than any point in recent history, including during the 2008 financial crisis.

The planned sale, which would be spearheaded by Goldman Sachs & Co. and Barclays Capital Inc., is unprecedented given its magnitude — even for an institution of Harvard’s size — but remains within the normal guidelines of financial management for corporations with annual revenues that exceed $5 billion.

A University spokesperson declined to comment on the filing.

The move provides the latest glimpse into the University’s financial situation which has been under stress as it faces donor backlash, a series of costly legal battles, and the threat of a possible Massachusetts endowment tax that would carry an annual cost of $1.2 billion.

The potential bond sale comes as the University — which relies on philanthropy for 45 percent of its annual revenue — has seen billionaire donors like Kenneth C. Griffin ’89 and Len V. Blavatnik pause donations to the University over its handling of antisemitism on campus.

Harvard faced widespread backlash over its initial slow response to Hamas’ Oct. 7 attack on Israel, prompting a congressional investigation that subpoenaed top Harvard officials, including Harvard Management Company CEO N.P. “Narv” Narvekar, for meeting minutes related to discussions about antisemitism.

The proposed debt financing will be sold through two bond series: $750 million of taxable fixed rate bonds issued by the Harvard Corporation, and $900 million tax-exempt fixed rate bonds issued by the Massachusetts Development Finance Agency.

Harvard will be entering a borrowing market plagued with high interest rates, making a potential debt raising effort extremely costly. When the University issued $750 million in bonds during the second quarter of 2022 the Federal Funds Rate sat at 100 basis points, today the Federal Reserve is expected to hold steady in the range of 525 and 550 basis points.

The 2022 capital raising effort was targeted to complete the University’s financing of major campus projects, including the Science and Engineering Complex and the College Housing Renewal. Monday’s filing provided no details about upcoming campus projects, leading to speculation that the debt raising effort was in response to a dropoff in donations.

Hedge fund manager Bill A. Ackman ’88, one of Harvard’s fiercest critics since Oct. 7, claimed that the recent filing is a result of a decline in alumni donations that Harvard financial managers did not predict in their forecasts.

“The model likely did not predict a decline in liquidity events from private equity, real estate, and venture capital and the dramatic decline in donations,” Ackman wrote on X.

“That is likely why Harvard announced this recent bond offering, which is being done in a substantially higher interest rate environment than where the funds could have been raised a couple of years ago,” he added.

Harvard now joins Princeton, which sold $600 million in bonds last week, as many higher education institutions attempt to sell debt in a deteriorating credit market. Both universities currently hold top credit ratings from Moody’s and Fitch, but received a bleak outlook for the 2024 fiscal year in December.

—Staff writer Sidney K. Lee can be reached at sidney.lee@thecrimson.com. Follow her on Twitter @sidneyklee.

—Staff writer Thomas J. Mete can be reached at thomas.mete@thecrimson.com. Follow him on Twitter @thomasjmete.