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LSE raises £125m through private investors to support campus redevelopment

The London School of Economics and Political Science has raised £125m by means of private placement of unrated debt. The money borrowed by the School will be used for the capital redevelopment of its recently expanded campus.

Saw Swee Hock Students CentreThree major investors were successful in their bids to lend money to the LSE for a mix of 15 year, 30 year and 40 year maturities, arranged by Barclays Bank Inc. They are all life assurance companies seeking long term fixed rate income.

The School received the funds on 27 November which will be used to support the capital development program of the next ten years and beyond.

The two main future capital developments planned are a redevelopment of the East Building and St Clements Building on the main LSE campus, to commence in 2015. This is in addition to a refurbishment, re-modelling or redevelopment of the recently purchased 44 Lincoln’s Inn Fields, which will commence in 2016.

The School is also set to complete the £38m development of the Saw Swee Hock Student Centre in the coming weeks.

The primary sources of funding for capital development at the School will continue to be surpluses generated from academic activities and philanthropic support. The new borrowing will enable peaks of investment in capital development to be funded earlier and over a longer period than otherwise would be the case.

Commenting on the private placement, LSE’s Chief Financial Officer, Andrew Farrell said,

LSE has received a competitive pricing for this placement. This reflects investors’ confidence in the School’s financial position, in our longer-term strategy, in our commitment to high academic quality for faculty and students and in the School’s management and governance.

Since the 2008 financial crisis, it is no longer sensible for universities to borrow long-term money directly from banks, as rates of interest would not be competitive. Public Bond issues and private debt placements are likely to be the main forms of long-term finance for universities in the UK for the foreseeable future.