Whole-business securitization: RBS structures university funding conduit
The Unifund conduit mirrors the Artesian structure that the UK bank created for water companies back in 2002.
"We are allowing universities the ability to access longer maturities – that is obviously attractive and that in particular is making it a very compelling alternative to the bank market"
Royal Bank of Scotland has created a new funding tool for UK universities called Unifund. These institutions currently use bank lending and private placements to finance themselves. Unifund allows universities to access the capital markets indirectly by pooling loans into a conduit. "What we have done is to create a £500 million programme that has a bullet maturity in 2047 which will give universities access to a wider group of investors and target the 40-year part of the curve, which is very attractive right now," says Peter Dooley, director in the RBS corporate securitization team.
Because of the small size of a typical university financing operation – say £60 million – bond finance is not a particularly worthwhile option. But RBS can pool university loans in Unifund, get a monoline to provide credit enhancement and sell securities to institutional investors.