University Of Michigan plans to issue $300 million of commercial paper next week.

DALLAS — The University of Michigan will sell $300 million of high grade commercial paper next week to fund ongoing capital projects and refund debt.

JPMorgan is the lead manager on the deal, expected June 22.

Ahead of the sale, Moody's Investors Service and S&P Global Ratings affirmed the Michigan Board of Regents' respective Aaa and AAA ratings on $2.1 billion of debt issued on the university's behalf. The outlook is stable.

The stable outlook reflects analysts' expectation that UM will maintain positive consolidated operating results and sustain its strong liquidity position while also maintaining its exceptional research and student demand profile and a manageable debt burden as its implements an extensive capital plan.

UM is the state's flagship among 15 public universities. It has an enrollment of more than 60,000 at its main campus in Ann Arbor and two other campuses in Dearborn and Flint.

The university plans to increase enrollment of first-time freshmen students on its Ann Arbor campus by roughly 2% over four years, beginning in the fall, a move Moody's considers as a credit positive. The projected growth will result in an additional 1,100 full time students and will support the university's plans to launch new academic programs.

To maintain the ratings, the University of Michigan hospital and healthcare system are also expected to meet or exceed projections and show steady progress in improving operating margins while maintaining strong debt service coverage and stable unrestricted reserves.

"The performance of the health system is integral to the university's rating, with nearly half of operating revenue coming from healthcare activities," Moody's said.

The system operates three hospitals on one main campus (University Hospital, the C.S. Mott Children's Hospital, and Von Voigtlander Women's Hospital), 40 health centers, and 140 outpatient clinics.

UM also expects to issue another $595 million in additional debt over fiscal years 2017 and 2018. Over the next five years, management projects that debt may increase up to $2.6 billion from $2.1 billion.

The university had total operating revenues of $6.8 billion last year with cash and investments of $11.6 billion and an endowment of $11.7 billion, according to Moody's. State operating appropriations are only 5% of the university's overall revenue but play "an outsized role" for UM's Dearborn and Flint campuses, according to Moody's.

State funding is expected to see modest growth in fiscal 2017, with the university benefiting from appropriations based on performance outcomes and low tuition increases for in-state undergraduate students.

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