University Credit Rating – Impact of new Debt
The expect that the University is able to maintain its current Moody’s credit rating of A1 with the additional debt The latest Moody’s report from July 2016 is summarized below:
Strengths • Significant growth in state operating support that offsets a mandated total 20% reduction in undergraduate resident tuition charges in FYs 2016 and 2017 • Improving debt service coverage from pledged revenues; 1.6 times projected coverage in FY 2016 following very thin coverage in FY 2015 • Resumed enrollment growth of 4.7% since fall 2013; nearly 10,600 FTE student in fall 2015 • Receiving $150 million in capital appropriations over the 2015-2017 biennium Challenges • Operating deficits due to strategic investments; three-year average operating margin of -3.9% between FY 2013-15 • Thin reserves relative to operations; spendable cash and investments covered expenses a low 0.3 times in FY 2015 • Substantial other debt-like obligations through large pension liability • Historically volatile enrollment provides budget challenges
What could make the rating go up • Significant growth of liquidity and overall university wealth • Consistent trend of university surpluses and much stronger debt service coverage from pledged revenues
What could make the rating go down • Return to weak debt service coverage from pledged revenues • Material decline in unrestricted liquidity
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