Harvard Re-Enters Debt Market With $450 Million Bond Sale

Harvard University will re-enter the debt market this week, issuing $450 million in tax-exempt bonds to “finance and refinance certain capital projects,” according to a preliminary official statement released by the University on Thursday.

The bond sale follows a fundraising crisis for the University during the 2024 fiscal year when total philanthropic contributions dropped by 14 percent. Donations to Harvard’s endowment alone fell by $193 million, as several high-profile donors suspended contributions over the University’s handling of campus antisemitism.

If Harvard is able to attract investor interest in the new $450 million bond sale, its total debt would increase to at least $7.6 billion, a 21.8 percent increase in debt over two years.

The University raised $750 million through a similar bond sale last year, which was met with strong investor demand despite concerns about donor backlash.

This, in addition to the University’s sale of $855 million in tax-exempt bonds last spring, increased Harvard’s total debt from $6.2 billion to $7.1 billion in FY 2024.

In a marked shift from last year, when the University sold the bonds themselves, the bonds were issued through the Massachusetts Development Finance Agency on behalf of Harvard. Interest on the bonds and any profit from the sale of the bonds are exempt from Massachusetts personal income and property taxes, unlike the taxable issuance in 2024.

Harvard Business School Professor Luis M. Viceira wrote the bond sales were “just normal course of business.”

“Most educational institutions use the MA Development Finance Agency to issue debt, precisely because it is their only way to issue tax exempt debt, which typically carries a lower interest rate,” Viceira wrote in an emailed statement.

The statement also includes an “Additional Considerations” section addressing potential impacts of the Trump administration’s policies on Harvard’s financial health.

Among the concerns cited, the University highlighted the 15 percent cap on the indirect cost recovery rate for NIH grants, a restriction that could significantly impact Harvard’s research funding. As the statement acknowledges, the cap has been contested in court, though the outcome remains uncertain.

The statement also names the Department of Education’s threats to revoke federal funding for institutions that use race-based decision-making as a major concern.

“While the financial impact on the University resulting from the totality of potential developments at the federal level cannot be quantified at this time, any such developments may, directly or indirectly, have a material adverse effect on the current and future financial profile and operating performance of the University,” the statement reads.

S&P and Moody both reaffirmed Harvard’s AAA credit rating, citing its strong financial position, large base of sponsored research, “robust” fundraising capacity, and “exceptional demand” for its academic programs.

In its full report, S&P specifically flagged the large percentage of federal research funding at risk under the Trump administration and the indirect cost cap as “heightened sector risks.”

But S&P maintained that Harvard’s financial health should not be significantly affected by these threats.

“We view Harvard’s financial position as sound given the university’s robust liquidity and flexibility to face short-term funding disruptions,” according to the S&P rating report.

Goldman Sachs will serve as the senior manager for the upcoming bond sale, with Morgan Stanley acting as co-senior manager.

Rutgers Business School professor John M. Longo said the bonds should produce attractive yields for Harvard, citing the University's ability to generate strong long-term investment returns.

“AAA-rated municipal bonds currently range in yield from roughly 2.7 percent per annum for short-term debt to 3.9 percent for long-dated maturities,” Longo wrote in a statement to The Crimson.

“Even with the recent uptick in inflation, these are fairly attractive yields for bond issuers,” he added.

—Staff writer Avani B. Rai can be reached at avani.rai@thecrimson.com. Follow her on X @avaniiiirai.

—Staff writer Saketh Sundar can be reached at saketh.sundar@thecrimson.com. Follow him on X @saketh_sundar.