Debt Policy



The Board of Trustees of Michigan State University (Board of Trustees) has determined that prudent use of external debt and debt-related derivative instruments can help MSU achieve its strategic objectives while maintaining its credit ratings at desirable levels, based on an appropriate balance of access to capital markets, financial risk and cost of capital.  This policy states the principles that shall govern the use of external debt and debt-related derivative instruments to finance capital projects and the acquisition of capital assets.

Debt Subject to Policy

As used in this Policy, “Debt” means MSU obligations for the repayment of borrowed money, however evidenced, incurred to fund the construction of capital projects or the acquisition of capital assets (including installment purchase obligations and lease purchase agreements), and related derivative interest rate swaps, caps, floors, and similar arrangements, except that obligations payable from specified sources other than MSU General Revenues (as defined in MSU bond indentures) are not included in the definition of “Debt” as used in this Policy.


  1. The Board of Trustees of Michigan State University is a Michigan constitutional body corporate with the authority to incur Debt payable from and/or secured by the revenues it controls.
  2. MSU incurs Debt in strict compliance with applicable law and with Debt-related contractual covenants, and engages in regular internal compliance monitoring.
  3. MSU incurs Debt to fund Capital Projects that are consistent with MSU’s mission and strategic priorities and approved in accordance with Board of Trustees Policy 02-06-01: “Capital Project Planning and Approval” and the procedures thereunder, and financings shall be coordinated to minimize the fixed costs of undertaking a borrowing.
  4. In addition to capital assets included as part of an approved Capital Project, MSU incurs Debt to fund acquisition of capital assets:
    • As part of a Master Lease Purchase Program approved by the Board of Trustees,
    • Upon recommendation by the Vice President for Finance and Treasurer, and the Committee on Budget and Finance and approval by the Board of Trustees, or
    • As may be authorized under the resolution adopted by the Board of Trustees for specific Debt issuance.
  5. MSU seeks to maintain national credit ratings in the AA/Aa range at a minimum and uses selected actual and pro forma financial ratios, consistent with major credit rating agency criteria, to confirm that it is operating within appropriate parameters for its desired credit rating.
  6. MSU incurs variable rate Debt when advantageous in light of market condition.
  7. MSU does not enter into Debt-related derivative transactions for speculative purposes, but rather uses Debt-related derivatives only to minimize Debt-service costs and manage interest rate risk. The Vice President for Finance and Treasurer makes the determination if any Debt-related derivative is in the best interests of the university, Debt-related derivative transactions are reported to the chair of the Board of Trustees’ Committee on Budget and Finance prior to execution.
  8. Debt-related agreements are reviewed and approved by legal counsel prior to execution.
  9. When entering into interest rate swaps and other derivative transactions, MSU (a) limits counterparty risk through protections such as (i) diversity in counterparties, (ii) assessment and monitoring of counterparty credit ratings and (iii) collateralization for credit support requirements, and (b) limits structural risk by protections such as (i) closely coordinating derivative amortization schedules with related Debt and (ii) using recognized market interest rate indices.
  10. Acquisitions under a Master Lease Purchase Program are a form of Debt.  All acquisitions under a Master Lease Purchase Program must be approved by the Vice President for Finance and Treasurer or his/her designee.


The authority for the following actions relating to incurring and managing Debt is delegated to the Vice President for Finance and Treasurer and the Director of Investments and Financial Management, or either of them individually:

  • Establishing procedures and practices to implement the foregoing guidelines;
  • Engaging Debt advisors, underwriters, remarketing agents, swap counterparties, liquidity providers, Debt-service trustees or other external parties necessary to issue or administer Debt; and
  • Executing and filing the annual disclosure required by Rule 15c2-12 of the United States Securities and Exchange Commission.

Reporting Requirements

The Vice President for Finance and Treasurer will provide an annual report to the President and the Trustee Committee on Budget and Finance that will detail all outstanding Debt (by series, for bond Debt), including the amount outstanding, interest rates, maturity dates, terms, performance and market values of related derivative instruments, and associated Debt-service requirements, and will summarize the changes in outstanding Debt since the last report.  The report also will compare MSU’s Debt capacity to rating agency medians of public institutions of higher education with comparable credit ratings.


Enacted: 6/16/06

Amended: 9/6/19