Fallout from Connecticut’s declining ratings has extended to its flagship state university.
Moody’s Investors Service on Thursday night placed the University of Connecticut’s Aa2 rating on $106 million of special obligation student fee revenue bonds on review for downgrade.
It acted similarly on the University of Connecticut Foundation's Aa2 rating for $5 million of Series B revenue bonds issued through the Connecticut Health & Educational Facilities Authority.
Moody’s cited its recent downgrade of the state’s general obligation bonds – one of three Connecticut received from Wall Street within six days.
Moody’s lowered Connecticut GOs to A1 with a stable from Aa3 negative, and Fitch Ratings and S&P Global Ratings both dropped the state to A-plus from AA-minus. Kroll Bond Rating Agency rates the state AA-minus. Fitch, S&P and Kroll all assign stable outlooks.
Connecticut joined Illinois and New Jersey as states below double-A.
UConn has a more than 35% revenue reliance on the state for operations, debt service and employee benefits, according to Moody’s.
“UConn's rating review will focus on its independent ability to adjust to potential reductions in state support in the next few years,” Moody’s said in a statement. “The review for UConn Foundation reflects its interdependent role and its shared governance with UConn.”
Moody’s said the review will include an assessment of both the university's and the foundation's standalone ability to finance their own operations from growth in existing or new revenue sources. This will factor in projected operating results and liquidity for fiscal 2017 as well as budgeted FY 2018 and assumptions.
“We will also review executable contingency plans to cope with lower revenues,” said Moody’s. “Additionally we will consider any developments at the state and possible restructuring of its pension plans.”
S&P, meanwhile, corrected the information it provided the state and UConn on Wednesday, according to David Barrett, communications director for state Treasurer Denise Nappier. S&P did not downgrade the UConn 2000 bonds.
"S&P Global Ratings continues to rate the UConn 2000 bonds at AA-minus with a negative outlook," Barrett said in a statement.