The California State University system will sell $430 million of revenue bonds on Wednesday.
Standard & Poor’s assigned an A-plus with a positive outlook. Moody’s Investors Service gave the planned issuance a Aa2 with a stable outlook.
The deal includes $185 million of refunding bonds.
Standard & Poor’s analysts said CSU received the revised outlook because of its management practices during challenging state budgetary times.
“The positive outlook is based on our view of CSU’s fundamental institutional credit strengths, including its strong management team with good fiscal planning and policies,” said analyst Bianca Gaytan-Burrell.
“We believe that, because of these factors, CSU is positioned to manage through a state funding environment that is expected to continue to be constrained.”
The bonds are secured by a broad pool of revenues such as student housing fees, student union fees, and parking, student center, and continuing education revenues, according to Standard & Poor’s.
Barclays and Loop Capital Markets are the underwriters on the deal.
CSU’s information system and financial management has improved since the university system was last rated in March 2010, said Standard & Poor’s analyst Carlotta Mills.
“They have been able to increase their tuition to the point where tuition exceeds state support for the first time,” Mills said. “The combination of strong financial management and good demand has enabled them to be more insulated from the state issuance.”
Despite the tough budgetary times, California also has continued to provide capital funding to universities, which has not necessarily been the case in other states during the recession, according to Gaytan-Burrell.
If this good performance continues through 2012, Mills said, the rating agency could raise the rating during the next two years.
“We have seen improved markings from the rating agencies since the adoption of the budget,” said Tom Dresslar, a spokesman in the state treasurer’s office. “They reflect the strength of the budget and the progress we have made in dealing with the state’s structural budget deficit. Our cash flow, at this point, is light years ahead of the previous spending plans.”
