Moody’s Investors Service upgraded Boston University to A1 from A2 on Tuesday.

The upgrade affects $1.1 billion in direct debt. The school has a total of $1.3 billion in debt and Moody’s anticipates the school adding $120 million more this spring.

With the upgrade Moody’s is revising its outlook from positive to stable.

Standard & Poor’s gives Boston University an A rating. Fitch Ratings does not rate the school.

Moody’s attributed the upgrade to the school’s improving academic and research reputations, greater popularity among applicants and increased success in attracting monetary contributions.

Among the strengths Moody’s  vice president Kimberly Tuby and analyst Eva Bogaty identified was its large size – over 25,000 full-time equivalent students – making it one of the largest non-profit universities. They also noted that the university’s students attended a variety of undergraduate, graduate, and professional programs.

The school combines a large and diverse revenue base with careful expense containment, they wrote. This has contributed to consistently strong operating cash flow – the operating margin in fiscal 2010-2012 was 6.3%. BU, as it is widely known, has also consistently had a healthy debt service coverage – 3.8 times debt service coverage in fiscal 2010-2012, they wrote.

BU’s leadership has made important changes in the last seven years, Tuby and Bogaty wrote. As a result of BU’s improving research reputation, the Association of American Universities recently accepted BU as a member.

BU also has “substantial holdings of marketable real estate in the high value Boston market including non-core residential, office and retail buildings,” Tuby and Bogaty wrote.

For challenges, the analysts noted that the university has invested heavily in capital projects in recent years and had “significant indebtedness.”

The analysts also wrote that the university was competing against highly regarded private and public universities. BU’s net tuition per student of $32,748 in fiscal 2012 “is already quite high.” The university is increasingly competing with other schools that have larger endowments designated for financial aid.

Finally, while the school has shifted recently to a greater portion of its debt being fixed rate, it still has a complex debt structure, the analysts wrote. The university has a large debt-related interest rate swap portfolio.

BU spokesman Colin Riley responded to Moody’s action by saying, “The upgrade reflects the sustained improvement in the university’s market, academic, and research reputations as well as the successful results of our comprehensive fund-raising campaign to date, and affirms the progress Boston University has made towards the ambitious goals set forth in our strategic plan.”

In the most recently released US News & World Report BU’s college ranked 51st in the United States for colleges in national universities. This was up from its 53rd rank in the previous year’s edition. The ranking was out of 1400 colleges in the report.

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