{"id":345956,"date":"2010-02-21T10:19:56","date_gmt":"2010-02-21T15:19:56","guid":{"rendered":"http:\/\/chicagopressrelease.com\/press-releases\/uis-bond-rating-off-watch-list-but-outlook-is-negative"},"modified":"2010-02-21T10:19:56","modified_gmt":"2010-02-21T15:19:56","slug":"ui%e2%80%99s-bond-rating-off-watch-list-but-outlook-is-%e2%80%98negative%e2%80%99","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/345956","title":{"rendered":"UI\u2019s bond rating off watch list, but outlook is \u2018negative\u2019"},"content":{"rendered":"

\n\tIllinois’ fiscal troubles prompted investment services to downgrade the state’s bond rating last year, ranking it second worst in the country after California.<\/p>\n

\n\tThe fallout affected state universities, with Moody’s Investment Service lowering its bond rating to A3 (upper-medium grade, low credit risk) for Eastern Illinois, Western Illinois, Southern Illinois and Illinois State universities and placing those schools on its “watch list” for further downgrades.<\/p>\n

\n\tMoody’s this month confirmed the University of Illinois’ higher Aa3 rating (high quality and very low credit risk) and removed the school from its watch list, though it changed the UI’s outlook to “negative.”<\/p>\n

\n\tThe UI’s core rating covers hundreds of millions of dolllars in bonds issued to pay for upgrades to auxiliary facilities supported by student fees, such as the Assembly Hall, as well as “certificates of participation” used to finance other UI projects. It has been Aa3 for at least a decade.<\/p>\n

\n\tOther specific UI bond issues carry slightly lower ratings: the UI Hospital system has an A2 rating, and the UI Chicago’s South Campus expansion is rated A1.<\/p>\n

\n\tStandard and Poor’s has yet to update its ratings, but UI officials met with the company earlier this month.<\/p>\n

\n\t“We’re hopeful that we’ll be able to maintain the current ratings,” said Doug Beckmann, senior associate vice president for business and finance.<\/p>\n

\n\tThe ratings determine how much it costs the UI to borrow money for a project. The higher the rating, the less interest it has to pay on the bonds.<\/p>\n

\n\tIt’s highly unusual for an entity with tax authority, like the state, to be rated less than Aa, Beckmann said. <\/span>Illinois was downgraded from A1 to A2 in December.<\/p>\n

\n\tThe state’s budget crisis, which delayed $475 million in factor” in Moody’s evaluafactor” in Moody’s evaluation, Beckmann said. Offsetting the bad news somewhat is the university’s access to cash reserves, such as private gifts or overhead from research grants.<\/p>\n

\n\tAlso working in the UI’s favor: rising enrollment and tuition income.<\/p>\n

\n\tMoody’s noted the UI has immediate access to about $400 million in money-market funds, plus other money that could be available in a week’s time. Still, it said those reserves could “drop to very low levels” if the state cannot provide more funding in fiscal 2010, as some fear.<\/p>\n

\n\tBeckmann likened it to collateral for a home mortgage. A person with a generous income is a better credit risk \u2013 until he loses his job.<\/p>\n

\n\t“Our strength is our income,” Beckmann said. “Our debt rating has been high because we have a large and diverse income stream. In this case, we’ve got one of our key creditors, the state of Illinois, not paying us. That really creates an income issue for us.”<\/p>\n

\n\tThe problem would be more serious if the UI decimated its long-term reserves, he said. The university has set aside $20 million in state funding, imposed mandatory unpaid furloughs and asked departments to reserve 6 percent of their budgets, all to gather enough cash to weather an $82 million state budget rescission, he said.<\/p>\n

\n\tIf the picture deteriorates further, it could affect the rating for the next round of UI borrowing: $47 million for the Ikenberry Commons student housing project this summer.<\/p>\n

\n\t“That’s when we’ll know what the final outcome is in all of this,” Beckmann said.<\/p>\n

\n\tJULIE WURTH<\/p>\n<\/p>\n

Distributed via Chicago Press Release Services<\/a><\/p>\n

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Illinois’ fiscal troubles prompted investment services to downgrade the state’s bond rating last year, ranking it second worst in the country after California. The fallout affected state universities, with Moody’s Investment Service lowering its bond rating to A3 (upper-medium grade, low credit risk) for Eastern Illinois, Western Illinois, Southern Illinois and Illinois State universities and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-345956","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/345956","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=345956"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/345956\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=345956"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=345956"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=345956"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}