City earmarks Pounds 48m for sector

Varsity Funding, a City consortium, is to make Pounds 48 million available to universities for long-term financing of capital projects.

The fund is being made available through a bond issue, a long-term security that is in effect an IOU issued by the company. The sale of the bonds to investors will significantly recapitalise Varsity Funding's recent investment of over Pounds 60 million in higher education.

Varsity Funding has already backed a number of university projects, including a Pounds 12 million student accommodation block at Greenwich University, the first Private Finance Initiative in the higher education sector.

King's College, London also appointed Varsity Funding to provide Pounds 20 million advance funding for the construction of 780 en suite student accommodation units.

Varsity Funding says that the assets underlying the bond issue will comprise financings already made to universities. Shemeel Khan of Bankers Trust, one of the consortium partners, said: "The issue provides universities with access to the capital markets. One of their key characteristics is that they can offer long-term financing at fixed rates. Varsity is in effect handling the risk and costs associated with the issue - something a university might have difficulty in dealing with."

Two other firms are involved in the joint venture - Redburgh Limited, a privately-owned finance company, and Pricoa Pim, an institutional investment management company.