These are trying times for UK universities.  The recent rises in interest costs, coupled with the energy and cost of living crises are stretching the funds of institutions across the country. 

With interest rates set to rise still further in the coming months, consider these five ways to help your university weather the storm.


If you haven't already secured a new debt facility, consider what options you have under your existing loan documents to extend or increase commitments.

Do your existing facilities have an option to extend their term? Remember that, typically, there is no obligation on lenders to agree to an extension so expect a price negotiation if you want to secure an extension. You will need to weigh up whether the relative certainty of committed facilities for a longer term is worth the additional cost. Of course the cost of that protection may continue to rise over time.

Will you need increased facilities? Do your existing facilities include an accordion – a mechanic for you to request an increased facility? Again, typically there is no obligation on lenders to agree to the increased facilities and you should expect a pricing negotiation. But is that price (including the commitment fee on the undrawn amount of increased facilities) worth paying for the knowledge that you have the security of an increased committed facility?

Not all existing lenders will want to extend or increase their share of committed facilities. Which new lenders might have appetite to take some commitment? In this context, think about lenders with expertise in the university lending space. Think too about what ancillary or other income might be available to your lenders and how you share those opportunities to optimise your core debt facility.


Consider securing a new facilities agreement with your existing lenders, even before your existing facilities mature.

Although forward start facilities may come at a higher pricing, with increasing refinancing risks, if you can secure continued funding in advance and obtain sign-off from your auditors on the adequacy of your cash flow forecasts, the pros may outweigh the cons.

As with the other facility options, there is no obligation on lenders to agree to any new facility. However, engaging your lenders in these discussions before you actually need to, should give you a good indication of which lenders would be prepared to offer some support and commit longer term liquidity. Knowing whom you can bank on in these times is key.  

You should seek to negotiate the forward start facilities on substantially the same terms as your existing facilities in order to avoid diminishing your existing facility position.


With interest rates having been low and stable in recent years, few universities have hedged their interest costs. Now that rates are on the rise, hedging too will be more costly. For your university, is the price of cost certainty worthwhile?


Given the multiplicity of factors now affecting financial performance, if you have not already done so, now is the time to increase the frequency with which you revisit your forecasts and retest projected financial covenant compliance.


Have you considered whether a sustainability linked loan is right for you?  If you can demonstrate a sustainable project or objective which can be linked to your loan this could be an option to explore with your lenders. While these types of loans may not be significantly cheaper than other types of lending, they can result in increased interest from lenders acting in this space and can also help bolster your university's sustainability credentials.

Why AG? We work in this space all day, every day with all of the lenders who will provide your university's debt funding. But we're completely independent

Gaenor Cassell

Gaenor Cassell

Partner, Finance

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