Canterbury Uni faces big loss, bonds unaffected

The University of Canterbury Council expects a 2012 budget loss of $17.4 million.

But payments to investors of its $50 million bond issue will be unaffected, according to Vice-Chancellor Rod Carr.

The next payment on the bonds is due on December 15.

The university budget anticipates a loss of $17.4 million from business as usual and a loss of $11.4 million after earthquake insurance proceeds for reduced revenue, estimated at $6 million.

Dr Carr is in “constant communication” with the Tertiary Education Commission which requires a 3% surplus. Discussions are under way about changes to covenants, he said.

This new budget loss compares with a 2011 “business as usual” forecast surplus of $3 million.

Dr Carr attributed the loss as a result of a downturn in domestic and full fee paying students, due to the earthquakes.

The overall financial effects will not be clear until mid March 2012, he said.

The forecasted deficit reflects a decline in total operating income of $8 million from the 2011 forecast. This is in part due to a $5 million decline in student tuition fees from the 2011 forecast. Total operating expenditure is $12 million ahead of the 2011 forecast. This includes an increase in insurance costs from $2.5 million to $6.2 million, and an increase in energy costs by $1.8 million.

During 2010 Dr Carr undertook initiatives to constrain enrolment of adult students, a policy that may now require revisiting.

Meanwhile, the $50 million bond issue was launched in 2009 by Murray & Company and First NZ Capital. The philanthropic nature of the bond offer gives investors the opportunity during the term of the bond to donate part, or all, of the sum owed on maturity while still receiving interest on the principal. They will also have the flexibility to forego some or all of the interest at any time during the term of the bond.

The 10-year maturing unsubordinated, unsecured bonds have a fixed interest rate of 7.25% for the first five years and reset at 1.75% over the prevailing five year swap rate.

Mr Carr also announced the appointment of John Wood, as the next chancellor, effective January 2012.

Dr Wood was born in Kaikoura and following his graduation from the University of Canterbury he gained a BA Hons in Politics, Philosophy and Economics from Balliol College, Oxford, before embarking on his diplomatic service service. He was elected Pro-Chancellor for the first time in 2008. In 2010 Dr Wood was re-elected to the University Council and re-elected as the University’s Pro-Chancellor.

Principal of Christchurch Boys’ High School Trevor McIntyre has been appointed to replace Dr Wood as Pro-Chancellor.

Current chancellor Rex Williams is resigning to focus more on his job as one of Environment Minister Nick Smith’s appointed commissioners at Environment Canterbury after elected representatives were sacked last year.