University in short-term market

The University of Southern California has found a new -- and cheaper -- way to raise funds, other than reaching out to commercial banks. Working in conjunction with the California Educational Facilities Authority, it recently issued its own $5 million worth of 7- month tax-exempt notes yielding 6.22 percent. This is believed to be the first time an educational institution has moved into the short- term money field in this way.

CEFA is a nonprofit state government organization established in 1974 to allow private higher learning institutions to enter the tax- exempt market for financing new construction. Since its inception, it has procured over $160 million through long-term securities issues. Under it regulations, the issuing institution -- not CEFA -- guarantees the notes.

USC's new short-term notes, sold at discounts like Treasury bills, were bought up in $50,000 units, mostly by bank trust departments. Commercial credit ratings on the notes were high, since these were fully backed by US gov ernment securities in the USC portfolio.