Ford Foundation plans record $1 billion bond sale for grants

Ford Foundation President Darren Walker has been in constant talks with nonprofits across the country worried about their futures as the coronavirus pandemic rips through their finances. So now he's turning to Wall Street to raise $1 billion to help.

The 84-year-old organization is set sell $1 billion of taxable bonds this month and use the proceeds to provide grants to nonprofits struggling to recuperate from the virus-related shutdowns that have halted most fundraising.

"We will have a tsunami of sorts that hits this community in the coming months," Mr. Walker said of nationwide nonprofit organizations. "Through this bond offering, we will be able to provide grants to the organizations we support that will help strengthen their balance sheets and make up for the loss that they know they will have to absorb."

Nonprofit organizations like museums and theaters have been reeling from the impact of the virus-related shutdowns as fundraisers are canceled and many have had to shut their doors to paying visitors.

Charitable giving has slowed as donors fear an economic recession. Even some of the largest, most well-funded organizations aren't immune. The Museum of Fine Arts Boston has furloughed more than 300 staff members and the American Museum of Natural History on New York's Upper West Side cut 200 full-time staff members and put another 250 on indefinite furlough.

The situation is so dire that even the Federal Reserve is considering support for some nonprofits. On Wednesday, Federal Reserve Chair Jerome Powell said the central bank was seriously considering expanding its long-awaited Main Street Lending Program to include nonprofits.

The Ford Foundation usually allocates $550 million to $600 million a year in grants and expects the coming bond offering will "significantly" augment their capacity to give money, Mr. Walker said. This year the foundation has provided 557 grants to 500 organizations totaling about $136 million. Recipients ranged from the American Ballet Theater to the Sentencing Project, a criminal justice group working to reduce incarceration in the U.S.

"Can you imagine New York City without the rich cultural treasures that make New York, New York? Can we imagine them in a reduced or compromised state? Imagine a world without our civil rights organizations who are protecting and promoting the rights of Americans to participate fully," Mr. Walker said.

The goal of the bond issue is to help build the balance sheets of these organizations because many "aren't ready for the kind of fallout for the shock that a pandemic will bring," Mr. Walker said.

The foundation expects to mail the offering documents Thursday and price the deal the following week or two after with a close by end of June, according to Wells Fargo Securities managing director Sally Bednar. The bonds are unsecured general obligations of the Ford Foundation, which Moody's described as having "exceptionally strong financial resources" in a 2017 report.

Foundations tap the bond markets on occasion typically to fund construction or renovation projects. The Ford Foundation sold $273 million three years ago to finance the improvement of its headquarters in New York City and the World Wildlife Fund sold $60 million in 2015 to refund debt sold to acquire and furnish office space. Nonprofit charities and organizations sold about $1.6 billion in debt through corporate and muni bond sales in 2019, according to data compiled by Bloomberg.

The upcoming offering will be a record for the market, according to Ms. Bednar, the banker with Wells Fargo, which is running the deal. The bank is seeking a "social bond" designation from Sustainalytics, a company that grades companies and their bond sales on environmental, social and governance criteria.

Because of the way the bond proceeds are going to be spent giving grant money to in-need charities — Wells Fargo is "very confident" the bonds will receive the designation they applied for, she said.

"We hope that the designation will open this offering to investors that don't normally come into these issues," Ms. Bednar said, who added that the deal is going to be marketed specifically to ESG-focused funds and European buyers.