The standoff between the Trump administration and the University of California at Los Angeles — which has already threatened more than $500 million in federal funding — is now derailing what was supposed to be a run-of-the-mill $1.5 billion municipal-bond sale.

The University of California pulled its planned borrowing that had been slated for this week, according to a person familiar with the matter. Proceeds from the sale were expected to fund various projects at the university’s 10 campuses and six academic health centers, according to Fitch Ratings. 

The development shows how the fight between President Donald Trump and Governor Gavin Newsom is reverberating beyond UCLA in yet another sign of the fallout from the administration’s attacks on higher-education institutions.

“The fact that they don’t know where this is going to land is enough of a reason to slam on the brakes,” said Justin Marlowe, a professor at the University of Chicago and director of the Center for Municipal Finance. “In the near term, I think they can manage around it, but if they have to delay a second or third issue, this could turn out to be a pretty disruptive thing, especially in a system like UC that’s trying to grow.”

Spokespeople for the University of California and Bank of America Corp., the joint senior manager on the deal, declined to comment. A representative for Jefferies, the book-running joint senior manager, didn’t respond to requests for comment. The Bond Buyer first reported the pulled deal on Wednesday. 

The offering was expected to price the week of Aug. 17, according to a post on California’s debt-sale website captured by an internet archive. That notice is no longer on the state’s investor relations web page. 

The transaction was set to include two tranches of general revenue bonds, one for $825 million and another for $675 million, according to an Aug. 12 report from Fitch Ratings. The company assigned the bonds an AA grade, the third-highest available.

Threats from the federal government and the risk of legal battles can complicate an issuer’s ability to tap debt markets. 

The White House is seeking a $1 billion settlement from UCLA to restore its frozen research funding, which the administration suspended over allegations of antisemitism and bias on campus. Newsom has blasted the freeze as political retribution and has been vocal in his opposition to the school settling with the administration. He said UCLA shouldn’t “bend on their knees” to the White House as he alleged other universities that settled had. 

“We’re not Brown, we’re not Columbia,” Newsom said. “I will fight like hell to make sure that doesn’t happen.”

Borrowers in the municipal-bond market are required to provide investors with information on risks that could impact the credit of the issuer. If Newsom, a Democrat, were to challenge the Trump administration’s actions in court, it would have made such disclosure challenging, according to the person familiar, who wasn’t authorized to discuss the deal publicly.

The UC system does have other financing options. For example, Sally Bednar, a consultant to colleges and former higher-education banker at Wells Fargo & Co., points out that the system also has a large commercial paper program.

“If they don’t issue bonds now, they have ample access to other funding sources,” Bednar said in an email. “Not all universities have as many funding options.”

UCLA depends on the federal government for about half its research dollars as does the California system as a whole. Of the $7.7 billion in research funding at the University of California in fiscal year 2024, more than $4 billion came from the federal government. A prolonged impasse could jeopardize thousands of projects across medicine, engineering, and the biosciences.

Rafael Jaime, president of the union representing graduate students, researchers and other non-faculty academic workers across the UC system, said more than 1,000 of his members were affected by the suspended funding, and that medical, engineering and biosciences research were hit hardest.

Jason Hinman, a UCLA physician-scientist, has $5 million in National Institutes of Health grants for dementia research at risk. He said the university’s research community is divided into two camps on the funding issue: those who see the university’s willingness to aggressively fight back as an important symbol for public higher education broadly, and those who believe vital public health research hinges on a swift settlement. Hinman leans toward the latter. 

“The urgency I feel is because there are both people and critical public interest health science efforts at stake,” he said.

With assistance from Amanda Albright, Liam Knox and John Gittelsohn.

This article was generated from an automated news agency feed without modifications to text.