S&P Global Ratings revised its outlook to negative from stable and affirmed its 'AA-' long-term rating on the University of Connecticut (UConn)'s $79.94 million series 2012A and $32.48 series million 2010A student fee revenue and refunding bonds, and $1.3 billion of 2000 general obligation (GO) debt service commitment bonds. The preceding dollar figures refer to the par amount outstanding for these issues as of UConn's fiscal year ended June 30, 2016.
"The negative outlook for the student fee bonds reflects our view that UConn's financial performance and available resources are weak for the current rating and that unfavorable state budget conditions are placing further strain on the university's finances," said S&P Global Ratings credit analyst Ken Rodgers.
The revised outlook for the debt service commitment bonds now reflects the outlook for the state. The outlook on these bonds subsequent to the state's outlook revision to negative from stable in early December had remained unaffected by the state's outlook revision until now because the bonds were also secured by the university's student fee revenue pledge and therefore the outlook associated with that security became operative.
The long-term ratings on the student fee revenue bonds reflect our view that UConn's enterprise profile is very strong and its financial profile is strong, leading to an initial indicative stand-alone credit profile rating of 'a+'. As our criteria indicate, the final rating can be within one notch of the indicative credit level. In our opinion, the 'AA-' rating on the university's bonds better reflects favorable enrollment trend and demand characteristics for the rating category compared with medians and peers.
The long-term ratings for the UConn 2000 GO debt service commitment bonds reflects the security of the state's GO pledge (see our report on Connecticut dated Dec. 1, 2016).
