DALLAS – The University of Utah earned a one-notch upgrade to AA-plus from Standard & Poor's ahead of a $76 million issue of general revenue bonds.
"The raised rating reflects a combination of the university's improved credit position and our criteria," said Standard & Poor's credit analyst Jessica Matsumori. "The rating further reflects our view of the university's very strong enterprise profile and solid market position."
The bonds, scheduled to go to market Feb. 2, will provide $55 million for the reconstruction of Orson Spencer Hall and the expansion of the orthopedic center. The bonds will also advance refund series 2012A auxiliary and campus facilities system revenue bonds.
Moody's Investors Service rates the deal an equivalent Aa1.
The university's continuing credit strengths are "counterbalanced by substantial exposure to the volatility of the healthcare industry and pressures from reductions in government payments through University of Utah Hospital and Clinics, and a highly competitive student market as it looks to retain market share for in-state high school graduates and recruit from outside the state," said Moody's analyst Eva Bogaty.
The flagship university has 27,000 full-time equivalent students and total operating revenue of almost $3.6 billion. The university also has growing research activity and serves an essential role as the state's sole academic medical center.
Revenues pledged to the university's bonds are all legally available income and revenues of the university less certain income and revenues. For fiscal year 2015, pledged revenues were $395 million. The Series 2016A bonds will not have a debt service reserve fund but have the moral obligation pledge of the State of Utah.
"The stable outlook reflects our expectation that continued strong cash flow and fundraising will support a higher level of capital investment over the next few years," Bogaty said.
