View frequently asked questions (FAQ) for University of California.

General Questions

How is bond sizing determined?

Capital Markets Finance determines the appropriate amount of bond funding based on an evaluation of eligible projects, which are then aggregated for a bond issue. Each project is “sized” to cover the following components:

• Project construction costs, including interest expense incurred in commercial paper

• Capitalized interest, if under construction

• Costs of issuance ("COI")

How is bond creditworthiness determined?

Rating agencies are organizations that provide potential investors with an analysis of the credit strength of bonds (and other debt) that have been scheduled for sale. The measure of strength is the rating assigned to the issue. Bond ratings range from "AAA" (the highest possible) to "C" or "D"(default category). Most municipal bonds are rated by one or more of the three major rating agencies:  Standard and Poor's, Moody's Investors Service and Fitch, and most of the University's bonds are rated by these three agencies. Each agency reviews the University of California and its overall financial position as well as the bond issue to be rated, including its sources of revenues, indenture requirements, and other factors. Find Rating Reports in the "Bond Ratings" section of this site.

What does it mean when a bond or note is tax-exempt?

Tax-exempt means that, in the opinion of legal counsel, the interest earned on the bond or note is exempt from federal income taxes; and, typically from California personal income taxes as well.  Investors should consult their brokers, financial advisors, or tax advisors to obtain comparisons between tax-exempt bonds or notes and taxable investment alternatives.  Not all University of California bonds are tax-exempt.  For additional information about the tax status of specific bonds, read the “Tax Matters” section of the official statement for that particular offering.  Official statements may be obtained by navigating to the "Financial Documents" section of this site.

What does it mean when a bond or note is taxable?

Certain bonds do not meet all of the rules for tax exemption. In this situation, the UC's bond counsel will not provide its normal opinion that interest on these bonds is exempt from federal income taxation.  The interest income on these bonds is still often exempt from State of California personal income tax.  Investors should consult their tax advisors for specific guidance in these situations. Please read the “Tax Matters” section of the official statement for the bond sale to learn about the bonds’ tax status.

What is a refunding?

Capital Markets Finance periodically reviews refinancing opportunities with the objective of lowering the overall cost of borrowing to provide debt service savings to the University. In a refunding, the University will issue a new refunding bond that will provide sufficient proceeds to 1) redeem or defease all or a portion of the prior bond, and 2) pay for costs of issuance.

The amount of the refunding bond debt service will then be allocated to the projects. In most cases, the par amount of the new, refunding bond will be higher than the par amount of the refunded bonds, and the debt service payments will be lower if the refunding bonds have at least the same maturity as the refunded bonds. A project which has been refunded to lower the interest expense will actually have higher bond par to repay if the project is not financed to maturity.

What are the steps to buy University of California Bonds?

Step 1 - Learn about the bonds

Read the Preliminary Official Statement (POS) available from this web site or from the participating brokers to learn more about the bonds, including their security, maturity dates, credit ratings, the types of projects they finance and other information that you may find important to help you make an informed investment decision. This website is not an offer to sell any bonds.

Step 2 - Open a brokerage account

You must have an account with one of the brokerage firms participating in the bond sale, or with another firm that can place an order through a brokerage firm participating in the bond sale. Please check to determine if your broker can place an order through the participating brokers. (If you have a brokerage account, go to Step 3.) If you do not have an account, you may open one and purchase bonds during the Retail Sale Order Period. A list of brokers participating in the sale can be found on the left side of this page.

Investors are encouraged to begin the New Account process well in advance of the sale date. Depending on the brokerage firm, internal new account procedures may take some time to process.

Step 3 - Place your order

Contact the broker with whom you have an account, either online or by phone, to get more information about how to buy bonds during the Retail Sales period. Discuss with the broker the number of bonds, the maturity date and the price at which you are willing to purchase the bonds, as well as any questions you may have from examining the Preliminary Official Statement (POS).

Can municipal securities be sold prior to maturity?

Most municipal securities may be sold prior to maturity with the assistance of a brokerage firm.  If an investor sells a municipal security prior to maturity, he or she may receive more or less than the original investment depending on prevailing market interest rates, supply and demand, perceived credit quality of the securities, and the costs incurred in connection with the sale, among other variables.  In addition, investors should consult a tax advisor for any tax implications.