Banking & Finance  May 1, 2015

Moody’s reaffirms UNC bond rating but downgrades outlook

GREELEY — Bond-rating agency Moody’s Investors Service on Friday announced that it had assigned an A1 underlying and Aa2 enhanced rating to the University of Northern Colorado’s $18.8 million offering of revenue bonds, and reaffirmed similar ratings for the school’s outstanding debt. However, it downgraded UNC’s underlying bond outlook from stable to negative.

UNC’s offering of Series 2015A fixed-rate institutional enterprise revenue refunding bonds are expected to be sold Wednesday, with proceeds expected to be used to refund the remaining outstanding Series 2005 bonds and pay issuance costs.

“The outlook revision to negative from stable reflects the university’s declining liquidity and rising fixed costs associated with an aggressive plan to grow enrollment by 25 percent by fall 2018,” said Mary Katherine Cooney, a Moody’s analyst, in a prepared statement. “The underlying A1 rating reflects UNC’s role as a mid-sized regional public university with relatively moderate leverage. UNC retains some pricing flexibility” and a relatively low share of students eligible for Pell grants.

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“The university faces elevated near-term risk as it attempts to alter its market profile by growing and diversifying enrollment,” Cooney said. “UNC will be challenged to achieve enrollment growth targets in light of two years of enrollment declines. Even with relatively optimistic enrollment assumptions, UNC’s drawdown of liquidity reduces its financial flexibility.”

Moody’s said the rating could go up if UNC could increase enrollment and show sustained improvement in cash flow. It could go down, the rating service said, if UNC had to borrow or use its financial reserves to construct its new student center in advance of full authorization of funding from the state of Colorado.

Proceeds from the Series 2015A Bonds are expected to be used to refund the remaining outstanding Series 2005 Bonds (amount to be refunded is dependent on market conditions) and to pay issuance costs.

“As part of the process to refinance bonds issued in 2005, we underwent a ratings review with Moody’s,” said UNC spokesman Nate Haas. “Moody’s affirmed our A1 rating and revised the outlook, which was not entirely unexpected given the landscape in higher education as a whole and our intentional strategies of building up reserves and then investing in programming aimed at boosting enrollment.

“We expect to maximize savings with the bond refinancing in the near term,” he said, “and will continue to work to meet the goals of our ongoing fiscal sustainability planning in the long term.”

UNC is the only area public university whose debt load hasn’t grown in recent years. At $141.5 million in 2014, UNC’s debt has remained essentially flat compared with $138 million in debt in 2005. Most of the debt owed by UNC stems from major renovations of buildings and parking lots in 2005, said Nick Taylor, director of North Slope Capital Advisors in Denver, in a previous interview with BizWest. The firm advises a number of universities on their finances, including UNC. The school’s debt-service payments represent 4.9 percent of the budget.

UNC enrollment declined slightly to 11,800 students in 2014 from about 11,900 in 2004.

In the fourth quarter, Standard & Poor’s issued the most negative ratings for universities of any institutions in the public-finance sector. There were eight credit-rating downgrades nationwide. No Colorado institutions saw their current ratings downgraded, but Colorado State University’s outlook was downgraded because of its high debt load.

GREELEY — Bond-rating agency Moody’s Investors Service on Friday announced that it had assigned an A1 underlying and Aa2 enhanced rating to the University of Northern Colorado’s $18.8 million offering of revenue bonds, and reaffirmed similar ratings for the school’s outstanding debt. However, it downgraded UNC’s underlying bond outlook from stable to negative.

UNC’s offering of Series 2015A fixed-rate institutional enterprise revenue refunding bonds are expected to be sold Wednesday, with proceeds expected to be used to refund the remaining outstanding Series 2005 bonds and pay issuance costs.

“The outlook revision to negative from stable reflects the university’s declining liquidity and rising…

Dallas Heltzell
With BizWest since 2012 and in Colorado since 1979, Dallas worked at the Longmont Times-Call, Colorado Springs Gazette, Denver Post and Public News Service. A Missouri native and Mizzou School of Journalism grad, Dallas started as a sports writer and outdoor columnist at the St. Charles (Mo.) Banner-News, then went to the St. Louis Post-Dispatch before fleeing the heat and humidity for the Rockies. He especially loves covering our mountain communities.
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