BRADENTON, Fla. - Standard & Poor's downgraded the general revenue bonds of the University of North Carolina at Charlotte to A-plus from AA-minus because of increased borrowing.
S&P affirmed the A ratings on certificates of participation issued by the UNCC at Charlotte Facilities Development Corp Inc., and revised the outlook to stable from negative on Feb. 26.
The revenue bond downgrade comes as the university plans to issue $110 million of general revenue bonds and $13.3 million of taxable limited-obligation refunding bonds, to which S&P assigned A-plus and A ratings.
The lowered rating reflects the agency’s opinion of the university's significant increase in borrowing the past few years, to about $522 million for the upcoming issuance from $153 million in fiscal 2009, according to analyst Jessica Wood.
The borrowing has “caused dilution in financial resources compared to debt, and has elevated the university's debt burden,” Wood said.
Even though UNCC’s debt is front-loaded, S&P said the institution’s pro forma maximum annual debt service burden of 7.4% is above average for the rating. The university also has moderate future plans for additional debt that could exert pressure on financial resources.
S&P said the A-plus rating reflects the university’s stable position as the fourth-largest higher education institution in triple-A rated North Carolina, where it also receives strong state operating support.
UNCC, which had 27,238 students enrolled as of the fall 2014 semester, has historically consistent and positive operations, as well as solid financial resources compared with operations, said S&P.
The university has adequate financial resources for the rating category compared with debt. Based on fiscal 2014 operating expenses, UNCC would have an above-average maximum annual debt service burden of 7.4% in 2018.
S&P said the university’s rating could be lowered further if operating performance deteriorates significantly or if UNCC issues a significant amount of new debt that its resources are diluted well below the A rating category medians.