By Jane R. Elgass
Moody’s Investors Service has placed the University’s credit rating on review for possible upgrade to Aaa, the highest rating possible. According to Robert Kasdin, executive vice president and chief financial officer, “very few universities in the country have attained this recognition.”
Announced June 26, the review, according to Moody’s “is driven by the University’s continued strengthening of its balance sheet, highlighted by its successful fundraising and conservative debt strategy, as well as favorable operating performance, including the University’s health care operations.”
Kasdin says the review “is clear confirmation by one of the world’s foremost observers of businesses that the faculty and staff at the University of Michigan work hard to control costs and make the most of the resources they have.
“This is a signal that business leaders and alumni already have noted, and is a sign that the University is one of the best managers of its resources in the country.”
Regent Laurence B. Deitch notes the value of the possible upgrade in light of the upcoming capital campaign.
“I believe it’s wonderful news for the University, and reflects the prudent financial management that is present throughout the entire institution. If our rating does go higher, it would be a tangible vote of confidence from outside observers, and would lower our borrowing costs.
“It should be a very strong sign to the donor community as well, as we contemplate a capital campaign. People who are willing to invest large sums of money want to be assured that it will be spent wisely and efficiently.”
Totaling $270 million of debt, the bonds that are under review include student fee bonds, $130.7 million outstanding, currently rated Aa1; housing revenue bonds, series 1993A, $11.7 million, A1; housing revenue bonds, series 1996A, $15.3 million, Aa1; parking system revenue bonds, series 1993A, $8.6 million, Aa1; medical service plan revenue bonds, series 1991, $9.9 million outstanding, Aa2; medical service plan revenue bonds, series 1995A, $52.8 million, As2/VMIG 1; medical service plan revenue bonds, series 1998A-1, $41.1 million, Aa2/VMIG 1.
Moody’s anticipates concluding the U-M review within the next several months.
Two other public universities recently have been placed on review for possible upgrades: the University of Virginia, from Aa1 to Aaa; and Texas A&M University, from As2 to Aa1. The University of Texas system was upgraded from Aa1 to Aaa.
