BRADENTON, Fla. — Vanderbilt University received an upgrade to triple-A ahead of its first foray into the bond market since separating financially from its medical center.
Fitch Ratings raised the Nashville university's ratings to AAA from AA-plus, analyst Tipper Austin said Friday.
The outlook is stable.
The university's operating risk and debt load were significantly reduced when Vanderbilt University Medical Center was spun off as a separate-but-strategically aligned nonprofit entity in April.
“The AAA rating reflects VU's superior balance sheet resources, excellent reputation and market position, solid operating results, and very low debt burden,” Austin said.
VU shed approximately $850 million of debt related to the medical center.
Available cash and unrestricted investments totaled $3.75 billion as of June 30 and equaled 3.3 times operating expenses and 6.9 times pro forma debt.
The university's $3.8 billion endowment provides consistent operating support through a sustainable spending policy, Austin said, and its revenue base is more diversified after the medical center's reorganization.
Fitch assigned the AAA rating to $140.4 million of taxable revenue bonds the university plans to issue through the Health and Educational Facilities Board of the Metropolitan Government of Nashville and Davidson County the week of Oct. 24.
Bond proceeds will be used to refund certain maturities of VU's outstanding 2009A bonds, finance capital projects and pay costs of issuance.
Moody's Investors Service assigned its Aa2 rating to the bonds. The outlook is positive.
S&P Global Ratings, which has not released a rating for the bond issue, currently rates the university's bonds AA with a positive outlook.
Both Moody's and S&P said their outlooks are related to its VU's decision to restructure the medical center to enable it to better adapt to health care's rapidly changing financial environment.
While the medical center remains tied to the university academically and by name, VUMC's new governing board has university and medical center representatives, a structure that is also used at other major institutions.
Vanderbilt University is a private research institution founded in 1873 in Nashville, Tenn.
More than 12,000 students were enrolled in the 2015-16 school year.
