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University May Assume More Debt

CFO Dan Shore says capital expenditures may necessitate further borrowing

By Peter F. Zhu, Crimson Staff Writer

After finishing the fiscal year saddled with an unprecedented $6 billion in debt, Harvard may borrow even more money this year to sustain various capital projects across campus, the University’s chief financial officer said last week.

Harvard spent $644 million this past fiscal year—which ended June 30—on a capital program that included new construction, acquisitions, and existing physical infrastructure, according to the University’s annual financial report released last Friday.

“We’re focusing very intensively on where we can reduce the scale and pacing of our capital projects to match our new resources,” said Dan Shore, Harvard’s chief financial officer, in an interview last Friday. But he noted that even a “shrunken down” series of capital expenditures would remain sizable simply due to the University’s large size, and that as a result, “at some point during the next year or so we could be going to market again [for more debt].”

In early 2008, the University broke ground on the Allston Science Complex—a facility aimed at promoting interdisciplinary science, rumored to boast an eventual pricetag of $1 billion—but announced in February that it would slow construction and reconsider the pace and design of the project. In the meantime, the University has pushed forward on expansion and renovation projects at the Harvard Art Museum, Law School, and Arnold Arboretum.

A credit rating report issued by Moody’s Investors Service in April said that Harvard was considering halving its capital spending and new debt issuance due to investment losses. The report said that Harvard had previously planned on issuing $3 billion in new debt over the next few years to fund campus expansions, in addition to spending roughly $1 billion a year on capital projects.

Shore said that debt has allowed Harvard to expand its campus in “programmatically critical” ways in the past, and that Harvard must now “carefully” manage and service that debt. According to the University’s recent financial report, Harvard’s principal payments on debt are expected to increase sharply over the next few years.

The total value of Harvard’s debt increased by almost $2 billion last year as the University issued new debt to refinance old debt and to provide extra cash flexibility amidst sudden budgetary turmoil. As a result of the new debt, the University’s interest payments increased by $58 million this past year, the report said, from $146 million to $204 million.

After the University’s endowment lost $11 billion this past year—falling to $26 billion—Harvard’s endowment assets now outnumber its debt by a factor of four, compared to a factor of nine last year.

Shore said that many of Harvard’s peers have asset-to-debt ratios that mirror the University’s current situation, and he noted that credit agencies have maintained Harvard’s ‘AAA’ rating despite the bond sales. Most elite institutions have also retained their top-notch credit ratings, although a number of other colleges did find themselves downgraded this year.

“Our objective still is maintaining our ‘AAA’ rating,” Shore said. “Before we take out any more debt we’d be in conversation with the ratings agencies to tell them our story and to make them comfortable.”

—Staff writer Peter F. Zhu can be reached at

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