Skip to main contentCambridge University Reporter

No 6522

Wednesday 17 October 2018

Vol cxlix No 4

pp. 55–67


Report of the Council on the use of external finance in accordance with the authority granted by Grace 2 of 10 May 2018

The Council begs leave to report to the University as follows:

1. This Report proposes a Special Ordinance to prescribe the use of the proceeds of a bond issue authorized by the Council.

2. By Grace 2 of 10 May 2018, which was approved on 18 May 2018, the Regent House gave the Council authority in advance to arrange, on the advice of the Finance Committee, external finance for income-generating projects up to a total amount of £600m until May 2019.

3. The Council, at its meeting on 21 May 2018, approved the recommendation of the Finance Committee to proceed with a bond issue of up to £600m, with the final details of the issue to be determined within parameters agreed with the Council. However, in giving its approval, the Council noted that it wished to be bound by a Special Ordinance that would restrict the application of the bond proceeds to income-generating projects, such that the approval by Grace of the recommendations of a Report to the Regent House would be required to enable the proceeds to be used for another purpose.

4. Recognizing that, in practice, eligible projects are likely to have a variety of characteristics, it is important to ensure that in preserving the core financial principles underpinning the approval for external borrowing, a framework is established that allows appropriate flexibility in the application of the associated financial parameters to meet the evolving strategic needs and priorities of the University over time.

5. Specifically, it may be that particular projects could be part-funded from the bond proceeds, subject to principles of commerciality, and part-funded from the University’s Capital Budget, with associated discretion for amended financial parameters, provided there is a clear demonstration of strategic fit and priority.

6. The fundamental principle that will be adopted by the Council in assessing eligibility for the purpose of meeting the requirements of Grace 2 of 10 May 2018 and, if approved, the requirements of the Special Ordinance set out in this Report is that, in aggregate, net cash inflows must be capable of meeting bond interest and principal repayments, while returning material additional economic value to the University in support of its core mission and student interest.

7. The specific principles that will be applied by the Council in assessing whether an individual project, to the extent it is proposed to be funded from bond proceeds, is considered eligible for the purpose of meeting the requirements of Grace 2 of 10 May 2018 are set out in Section 2 of the Special Ordinance.

8. The Council will establish detailed parameters and benchmarks for each project, under advice from its Finance Committee.

9. The Council will subject each project to rigorous and appropriate scrutiny ahead of approval and will ensure robust ongoing monitoring through its Finance Committee or alternative vehicles.

10.The Council accordingly recommends:

I.That the new Special Ordinance set out in Appendix I be approved.

15 October 2018

Stephen Toope, Vice-Chancellor

Nicholas Gay

Michael Proctor

Ross Anderson

David Greenaway

Sofia Ropek-Hewson

Richard Anthony

Nicholas Holmes

John Shakeshaft

Evie Aspinall

Alice Hutchings

Sara Weller

R. Charles

Fiona Karet

Mark Wormald

Stephen J. Cowley

Jeremy Morris

Jocelyn Wyburd

Anthony Freeling

Susan Oosthuizen

Appendix I

Application of bond proceeds arising from the authority granted by Grace 2 of 10 May 2018

1. By Grace 2 of 10 May 2018, the Regent House gave the Council authority to arrange external finance for income-generating projects up to a total amount of £600m.1

2. Projects will qualify as income-generating and therefore will be eligible to receive funds arising from the bond proceeds if, in the opinion of the Council on the advice of its Finance Committee, they:

(a)form part of the non-operational estate;

(b)are income-generating with a high degree of confidence in associated cash inflows;

(c)meet appropriate thresholds of commerciality, being capable of delivering cash returns over and above those required to service interest and capital repayment requirements of the bond, and delivering either:

(i)the same returns as projects in the external market that are comparable in their risk and return profile; or

(ii)a limited reduction to such returns that is expressly identified and justified on strategic grounds and approved as such by the Council;

(d)have a well-defined and stress-tested business case; and

(e)have clarity of responsibilities, appropriate resourcing, and well-defined governance, monitoring, and reporting arrangements.

3. Projects will be identified as income-generating and monitored under the existing processes for the review and oversight of capital and other projects, with regular reports on the use of the bond proceeds provided to the Finance Committee.


  • 1This upper limit applies until May 2019. To the extent that this authority is not fully used by 30 April 2019, the Council can, in accordance with the terms of Grace 2 of 10 May 2018, request continuation of the authority on a rolling two-year basis annually by Grace.