The University has issued roughly $1 billion in debt following a double-digit decline in the value of the endowment, which provides roughly half of the University’s operating budget.
“We want to make sure we don’t have to take draconian actions in terms of our operations,” Vice President for Finance and Treasurer Carolyn Ainslie told Bloomberg News. Issuing debt will finance operating costs and enable the University to maintain investments in fields such as private equity and real estate, which are expected to recover over time, according to Bloomberg.
Princeton joins several other universities that have turned to bonds to compensate for endowment declines, including Harvard, which issued $1.5 billion in debt last month. College endowments have fallen between 25 to 30 percent on average since June 30, according to the National Association of College and University Business Officers in Washington.
The sale, which represents the University’s first taxable issue since 1994, was split between 10-year 4.95 percent notes and 30-year 5.7 percent bonds, according to Bloomberg. Both maturities yield around 270 basis points more than Treasuries of similar maturity. Princeton will pay a lower rate than Harvard, which on Dec. 5 issued 6 percent 10-year notes and 6.5 percent 30-year bonds at a yield spread of 337.5 basis points for both issues. A basis point is 0.01 percentage point.
The University’s endowment fell 11 percent from June 30 to Oct. 31, President Tilghman announced last Thursday in a letter to the University community. Tilghman said it would be “prudent” for the University to plan for a 25 percent decline by the end of the year.
DOE extends contract with PPPL
The U.S. Department of Energy (DOE) has renewed its contract with Princeton University for the management and operating of the Princeton Plasma Physics Laboratory (PPPL). The decision was made after the Office of Science’s Source Evaluation Board conducted a competitive bidding process.
PPPL is one of 10 national science laboratories funded by the DOE’s Office of Science, which considered proposals for the management and operating of all of its facilities in 2008. The Office of Science submitted a Request for Proposals in June 2008 and collected submissions for consideration by September.
The contract is a cost-plus, award-fee contract set for five years. Under an award provision, the contract with Princeton could potentially be extended by an additional five years. Funding will begin on April 1, 2009, after a 60-day transitional period beginning this month.
The five-year baseline funding of the contract is estimated to be valued at roughly $390 million. The University can also earn an award fee of up to $1.8 million each year.
In the fiscal year 2008, the PPPL possessed a total of $80.1 million, $76.5 million of which came from the DOE.
PPPL is the leading facility for research in plasma physics and magnetic confinement fusion in the United States. Research at PPPL focuses on using powerful magnets to confine and control high-temperature plasmas, which yield fusion energy. Fusion power is considered a potential source of abundant and waste-free energy.
Princeton has managed the facility since 1951, when professor Lyman Spitzer GS ’38 brought the study of magnetic fusion to the University. The lab was officially named the Princeton Plasma Physics Laboratory in 1961.
Rouse to join Obama’s economic council
President-elect Barack Obama is expected to appoint economics professor Cecilia Rouse to his Council of Economic Advisers, according to The Wall Street Journal and The Chronicle of Higher Education.
If she is confirmed by the Senate, Rouse will be the first African-American to serve on the council which was formed in 1946. The other two members of the three-person council are Christina Romer of the University of California at Berkeley and Austan Goolsbee of the University of Chicago.
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