Eighteen colleges at the University of Cambridge have united to borrow £150 million.

The colleges created this alliance in order to increase their debt requirement to an amount that would interest investors, says Jonathan Spence, senior bursar at Queens’ College. Two new companies were created to raise this money: the companies will obtain loans from institutional investors and on-lend the proceeds to the colleges.

This issuing of private placement bonds is the first instance of a UK higher education institution using this form of financing.

The loans will allow the colleges to complete building and maintenance projects far more rapidly than their normal income would. Queens’ proposed building project should be completed by 2015. Speaking to Bloomsberg, Spence said that under normal conditions it would take the college 12 or 15 years to accumulate the necessary capital.

Rothschild, the investment bank advising the colleges, said that the loans required by the individual colleges ranged from £3 milion to £18 million. The loans will be separate and no college will be responsible for the debt of any other.

Investors are drawn by the age and apparent stability of Cambridge colleges, Francis Burkitt, a managing director at Rothschild told Bloomsberg: “These colleges are very, very long-term institutions and if you’re going to lend long term, these are natural institutions to loan to. These haven’t defaulted for 800 years.”

The colleges are seeking to profit from the financial climate of the times. The loans are long-term and will mature in 30 or 40 years, but they will be locked in at the historically low interest rates that are currently available, says Spence. The loans have an average interest rate of 4.42 percent.

The move may be seen as a response to cuts in government funding for UK universities.