Standard & Poor's Ratings Services said it has lowered its long-term rating on Connecticut Health & Educational Facilities Authority's series 2007B refunding bonds issued for University of Connecticut Foundation Inc. to A-plus from AA-minus.
The outlook is stable.
"The revised rating reflects increased debt leverage, as measured by a reduced level of expendable resources to debt; continuing unrestricted net asset deficit; a somewhat high 35% of endowment in level 3 asset class usually associated with less liquid assets; and potential credit risk associated with the terms of the unrated 2013C direct placement debt issuance," said Standard & Poor's credit analyst Ken Rodgers.
The rating reflects the foundation's: rather small endowment for a major public university at $330.2 million as of fiscal year-end 2013; historically strong fundraising; reliance upon fundraising proceeds rather than net revenue available for debt service to meet future maximum annual debt service commitments; higher debt level and associated diminution of its financial flexibility; and strong ties to the University of Connecticut.
Additional credit factors contributing to the revised rating are: ongoing recordation of small operating deficits on an unrestricted net asset basis totaling $3.6 million in fiscal 2013 and $377 thousand in 2012; and a $5.4 million unrestricted net asset deficit at fiscal year-end 2013 down from a $7.3 million deficit in 2012.
