Moody's Investors Service said it downgraded California Institute of Technology's ratings to Aa2 from Aa1 and assigns a Aa2 rating to the institute's proposed up to $400 million of taxable bonds, Series 2015.
The bonds are expected to be fixed rate bonds, with a bullet maturity in 2115. At the same time, it affirm the VMIG 1 short-term ratings. The outlook is stable.
Unless stated otherwise, the financial data and ratios presented below do not include the operating revenue and expenses of the Jet Propulsion Laboratory.
The downgrade is precipitated by this substantial new debt issuance which results in very high debt relative to financial resources and operations, combined with recent deficit operations and expectations of continued thin cash flow over the next few years.
California Institute of Technology's Aa2 rating reflects its global presence as an elite research institute and university with excellent student demand, growing financial resources and healthy liquidity to support operations. The institute's longstanding management of NASA's Jet Propulsion Laboratory (JPL) bolsters its research profile and adds scale and scope to Caltech's operations which are not reflected in ratios.
Key credit challenges include weakening debt service coverage with expected continued deficit operations (Moody's calculated). Weak operations have contributed to slower resource growth than peers over the last several years. With this issuance, the institute will have approximately 80% of its outstanding debt in very long-dated bullet maturities, which would be expensive to restructure due to make whole provisions.
