Standard & Poor’s last week raised its underlying rating on the University of Pennsylvania’s debt to AA-plus from AA.

The agency also assigned the AA-plus rating to UPenn’s upcoming Series 2008A revenue bonds to be issued by the Pennsylvania Higher Educational Facilities Authority.

The upgrade reflects “an improving balance sheet and sustained positive financial performance, bolstered by good financial performance at the university and the University of Pennsylvania Health System,” according to Standard & Poor’s. The agency rates UPHS AA-minus.

Standard & Poor’s said that the AA-plus rating reflects Penn’s general obligation pledge, which is supported by its national reputation and demand for academic programs; a large endowment of $6.6 billion and satisfactory liquidity; and a manageable level of debt.

Credit analyst Mary Peloquin-Dodd of Standard & Poor’s said that they expect the university to “maintain its relatively conservative debt posture and to increase its financial resources commensurate with any future debt issuance.”

Moody’s Investors Service assigned an underlying Aa3 rating to UPHS’ Series 2008A bonds.

The HEFA is expected to issue $105.8 million of variable-rate revenue bonds for the health system within coming weeks, according to an official working on the deal. The bonds are expected to be variable-rate demand obligations supported by a letter of credit from Bank of America, according to a Moody’s report.

Merrill Lynch & Co. is the underwriter and Ballard Spahr Andrews & Ingersoll LLP is bond counsel, according to an official.

Moody’s said that the bonds will be used to refund 2002 bonds and provide funds for construction projects at UPHS, including $45 million for the Roberts Proton Therapy Center.

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