NEW YORK - Standard & Poor's Ratings Services said it lowered its long-term ratings to AA from AA-plus on New York State Dormitory Authority's debt issued for Cornell University. Standard & Poor's also lowered its ratings on the university's series 2008B and 2008C bonds to AA/A-1-plus from AA-plus/A-1-plus. At the same time, Standard & Poor's assigned its AA long-term rating to the authority's $303 million series 2009A revenue bonds issued for the university and its AA rating to the $500 million Cornell University series 2009 taxable bonds.
Standard & Poor's also affirmed its A-1-plus short-term rating on various bonds and notes, issued by and for the university and its A-1-plus rating on the university's tax-exempt and taxable commercial paper (CP) programs.
The downgrade reflects near-term liquidity concerns, as evidenced by the need to issue long-term debt ($500 million) to meet working capital needs, with significant capital calls in the next two years; a substantial $650 million increase in debt; and the resulting decline in financial resources relative to debt. This is compounded by the weak investment markets, as well as expected structural operating deficits for the next few years.
The AA long-term rating reflects the university's impressive demand for both undergraduate, graduate, and professional degree programs, coupled with a national and international reputation as one of the largest Ivy League institutions; strong revenue diversity; and an endowment currently valued at $4.5 billion as of March 13,2009; demonstrated successful fundraising history; and a strong management team with solid planning and policy practices.
Offsetting credit factors include structural operating deficits for the next few years, reduced financial resource levels resulting from the substantial issuance of new money debt due and further compounded by weak investment markets.
"The stable outlook reflects our expectation of Cornell's continued demand for academic programs, strong fundraising, and adequate financial resources, despite the weakened investment markets," said Standard & Poor's credit analyst Lori Torrey. "We also expect the university to work toward balanced operations," said Torrey.
The university is issuing the series 2009A bonds to provide funds to partly refinance ($150 million) CP issued in 1998; various construction and renovation projects; and interest and costs of issuance of the bonds. Cornell will use the series 2009 taxable bonds to provide funding for working capital, capital projects, and costs of issuance. Both series of bonds are fixed rate and general obligations of the university. Post issuance, the university will have approximately $1.7 billion in debt.
