Moody’s Investors Service has affirmed the University of Iowa’s Aa1 rating and stable outlook for its utility system revenue bonds ahead of a $25 million sale slated for this week.
Iowa’s flagship public university has $970 million of rated debt, including its hospital debt.
The affirmation comes amid the university’s ongoing efforts to rebuild following devastating floods. The school suffered more than $700 million in damage and last week announced that replacing its fine arts campus would cost $405 million.
The Board of Regents is expected at a meeting this week to review designs and budgets for replacing the three buildings that make up the arts campus. Federal disaster funds are expected to cover about 65% of the costs, and borrowing, fundraising and insurance would cover the remainder, according to published reports.
Moody’s said the university’s credit is supported by its market position, membership in the Big Ten conference, strong research base, favorable operating performance, and healthy resource cushion. It has an enrollment of more than 28,000, received $457 million of research grants in fiscal 2011, and has resources of $1.7 billion that provide debt-service coverage of 1.54 times.
On the other hand, “these are offset by challenges of significant capital plans, including for recovery efforts from the campus damage in the June 2008 flood, exposure to health care operations through its hospital, and weak in-state demographics,” Moody’s wrote.
“The stable outlook reflects expectation of continued growth in student, research, and other related revenues to support current and projected leverage,” the agency added.
The school is planning up to $190 million of new debt over the next two years. Though it had more than $700 million of damage, it anticipates spending only $150 million of its own funds to rebuild. That includes $123 million of approved state funding through the issuance of academic building revenue bonds.
The University of Iowa Hospitals and Clinics is rated Aa2 with a stable outlook. It accounted for 44.3 % of total university revenues in fiscal 2011.
