Moody’s Investors Service last week downgraded the University System of Georgia Board of Regents’ Series 2003 project revenue bonds to Aa3 from Aa2 with a stable outlook.
The downgrade affects $12.7 million of debt issued on behalf of the university system by the Oconee County Industrial Development Authority, which is the only debt rated by Moody’s.
“The downgrade reflects the system’s ongoing increases in balance sheet leverage, more aggressive use of variable-rate since the bonds were issued in 2003, ongoing cuts in state operating support, and limited unrestricted financial resources relative to the operating expense base which has been growing,” said a report by Moody’s analyst Dennis Gephardt.
Security on the bonds is provided by rental revenues paid by the Board of Regents under the terms of an annually renewable rental agreement on behalf of the university’s Office of Information and Instructional Technology.
“Given the need to address projected enrollment growth, we expect that the board will continue to increase debt at pace faster than resource growth,” he said.
Unrestricted financial resources of $243 million at the end of fiscal 2008 were relatively thin, covering only 5% of annual operating expenses compared to 11% at the end of fiscal 2002.
