Standard & Poor's Ratings Services said it lowered its rating on the Board of Governors of the University of North Carolina's general revenue bonds, issued for the University of North Carolina at Charlotte (UNCC), one notch to A-plus from AA-minus.
Standard & Poor's also assigned its A-plus long-term rating to UNCC's series 2015 general revenue bonds and its A long-term rating to UNCC's taxable limited-obligation refunding bonds, which are secured by a subordinate pledge of the housing and dining system revenues. The outlook on all ratings is stable.
"The downgrade reflects our opinion of the university's significant increase in borrowing in the past few years, to approximately $522 million pro forma for this issuance from $153 million in fiscal 2009, which has caused dilution in financial resources compared with debt, and has elevated the university's debt burden," said Standard & Poor's credit analyst Jessica Wood.
UNCC's pro forma MADS (maximum annual debt service) burden of 7.4% is above average for the rating, despite being front-loaded. Additionally, UNCC has moderate plans for additional debt which, although they have been postponed, could exert pressure on financial resources that the agency already views as light for the AA-minus rating. The university can comfortably absorb this debt and future debt plans at the A-plus rating.
The A-plus long-term rating reflects the strong enterprise profile of the university, including consistent state support, solid demand and growing enrollment trends, and consistently positive operations on a full-accrual basis coupled with a conservative approach to budgeting and management. UNCC will maintain its historically conservative budgeting approach as it continues to implement its strategic and capital initiatives.
