University a Great Investment, Says Moody's
Declining state support for public universities and an increased reliance on tuition revenue have caused a major investors' service to downgrade bond ratings for colleges across the country. Except in Storrs - where UConn is bucking the trend and Moody's Investors Service has upgraded its rating.
"I call it the Good Housekeeping Seal of Approval," says Lorraine Aronson, vice president for financial planning and management. "This is a significant voice in the financial market saying we are a great investment."
The improved rating, to Aa3, means the revenue bonds issued to fund new construction will carry a lower interest rate, which will save the University - and UConn students - money. Previously issued bonds at higher interest rates could be refinanced too, further increasing the savings.
"What's particularly gratifying is that Moody's focused on our educational value and our financial stability, because everyone at this University has worked hard to achieve both" Aronson says. "Moody's cited the dramatic increase in student demand, and how competitively priced the University is."
The new rating supports a $75 million bond issue for construction of new housing on North Campus and the Greek Village complex behind the Towers Residence Halls.
The rating upgrade is in contrast to the downgrades public and private universities across the nation are facing, as the recession continues and state governments pare university appropriations. Moody's recently changed its outlook for private universities from "positive" to "cautiously stable," and its outlook for public universities from "positive" to "stable."
In warning investors to be wary of universities' bond issues, Moody's says the recession and fears over terrorism will hurt tuition revenue, endowment performance and private giving. Additionally , they note, the recession is squeezing state budgets, which could affect public university revenues.
"Moody's considers us a great investment, partly because we've done a good job with other investments that have been made in UConn," Aronson says. "The state invested in UConn 2000 and our campuses have been transformed. That drove individuals and corporations to contribute to the University, which helped produce a dramatic upturn in academics and research. Moody's is saying 'this is the place you want to put your money.'"
Moody's has also upgraded the rating for the UConn Foundation.
"It sends the same signal," Aronson says. "They're telling investors that if any bonding is sought by the Foundation, they should grab it.'"