CHICAGO — Moody's Investors Service has affirmed the ratings on $2.4 billion of debt issued by eight Illinois public universities, taking the schools off watch list for a possible downgrade after a three-month review triggered by the state's downgrade and concerns over the schools' exposure to chronic delays in state aid.

"The watchlist action reflected the universities' material dependence on the state for operating funds under a challenging budget environment and extensive appropriation payment delays," Moody's wrote in its weekly credit outlook this week.

Moody's downgraded Illinois one notch to A2 with a stable outlook in January.

The ratings assigned to all eight survived the review, though four were assigned a negative outlook due to ongoing challenges — Eastern Illinois University, Governors State University, Northeastern Illinois University, and Northern Illinois University.

The flagship University of Illinois, Illinois State University, Southern Illinois University, and Western Illinois University were assigned a stable outlook.

The flagship university has ratings that range from A1 to Aa2, while the other seven carry A2 ratings.

The flagship University of Illinois, the main campus of which is in Urbana-Champaign, has $1.62 billion of debt. Its auxiliary revenue bonds are rated Aa2, its south campus bonds issued for its Chicago campus are rated Aa3, and its health system bonds are rated A1.

Moody's said the school's ratings benefit from flagship status with strong student demand, national position as a leading research university, strong liquidity, growing balance sheet resources, and substantial revenues from student charges, research and other sources that mitigate its reliance on state funding.

The school has an enrollment of more than 74,000 full-time students and boasts $880 million in annual research funding. It closed out the last fiscal year with $560 million in unrestricted cash and financial resources of $1.9 billion and has raised $2.4 billion to date as part of its "Brilliant Futures" campaign.

It challenges include variable-rate market exposure, health care market risks, and a reliance on state aid to cover 30% of operating revenues, with only 40% of fiscal 2012 appropriations now in hand.

Illinois State carries $186.2 million of rated debt. The school benefits from its position as a comprehensive public university located in Normal with growing enrollment of 18,607 students, strong unrestricted monthly liquidity of $131 million, and resources that provide 2.6 times debt service coverage. It relies on the state for 38% of its operating revenues.

Southern carries $324 million of debt and relies on the state for 39.5% of operating revenues. Its rating is supported by its market position as the second-largest state school, healthy operating margins, and strong balance sheet coverage of debt.

The school, which has campuses in Edwardsville and Carbondale, has 28,593 full-time undergraduate and graduate students. Its growing financial resources of $257 million last year provided healthy coverage of debt and operations.

The school plans to issue $83 million in new debt by fiscal 2015. Management has managed through state delays through extensive cuts, reorganization, and planning.

Western, located in Macomb, carries $41.3 million of debt and relies on the state for 41% of its operating revenue. It benefits from its stable position as a regional public school with nearly 11,000 students, growing expendable financial resources of $68 million last year, and adequate operations. Its challenges include a highly competitive market and a modest unrestricted liquidity level.

Governors State carries $25.7 million of debt, and 45% of its operating revenues come from the state. Its rating is supported by a strong budget and cash-flow management that provides a cushion for modest cuts and payment delays. The school is located in the southern suburbs of Chicago and has 4,211 students at the junior and senior undergraduate level.

"The negative outlook reflects the university's significant reliance on state appropriations, moderate operating base and enrollment draw, and highly competitive market environment for a more narrow pool of applications in a demographically challenged region," Moody's wrote.

Eastern has $125 million of debt. Moody's attributed the rating confirmation to EIU's proven ability to manage significant delays and reductions in state funding demonstrated by consistently strong operating performance and debt service coverage, increased reserves, and a successful fundraising campaign that exceeded the school's original $50 million goal.

"The negative outlook reflects persistent enrollment declines that have pressured net tuition revenue growth in the fiscal year with expectations of stagnant growth in fiscal year 2012, as well as reduced occupancy in its residence halls," analysts wrote. State aid accounts for 39.8% of operating revenues. The school has an enrollment of nearly 10,000.

Northeastern has $36.5 million of debt. The school benefits from its unique market niche and position, healthy operating performance, strong debt service coverage, and healthy liquidity, Moody's said. The school operates a main campus and three satellite ones in the Chicago area serving 7,645 students.

The negative outlook reflects its reliance on state aid for 45% of its operating revenue and a dramatic increase in debt of $28.5 million expected soon to finance a new building site, Moody's wrote.

Northern carries $223.5 million of rated debt. The rating is supported by the school's market position as the state's third-largest public university, solid debt service coverage, and monthly liquidity of $120 million.

About 38% of the school's operating revenues come from the state. Its challenges include a spike in debt last year to finance new student housing to improve its appeal. The school has seen multi-year enrollment declines, including 4% last year, despite its location close to Chicago. The school has an undergraduate and graduate enrollment of 18,817.

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