Bangkok--14 Dec--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'A+' long-term rating to University of Vermont and State Agricultural College's series 2010A and 2010B bonds. At the same time, Standard & Poor's affirmed its 'A+' long-term rating and underlying rating (SPUR) on the university's revenue bonds and 'A+' long-term rating and SPUR on the university's other previously issued debt. The rating agency also affirmed its 'A-1 short-term rating on the university's commercial paper (CP).
The 'A+' rating reflects our assessment of the university's general obligation (GO) pledge, which is supported by its role as Vermont's (AA+/Stable) only comprehensive research university and designated land-grant institution; modestly growing enrollment and stable demand trends, with relatively high student quality; and adequate, but weaker, financial resources and cash and investment balances, for the rating.
Standard & Poor's based the affirmation of its 'A-1' rating on the university's CP program on a history of positive market access and underlying credit strengths.
Offsetting rating factors include Standard & Poor's assessment of the university's relatively low levels of state support, a high reliance on tuition revenues for a public university, and strong competition from regional private universities. In addition, the university reported a bottom-line loss in fiscal 2009, and expects operating deficits until 2012 on both budgetary and full-accrual bases. Standard & Poor's also noted a weakening balance sheet and 2009 financial resource ratios that are low for the rating category, compounded in recent years by other postretirement employee benefit liabilities, declines in unrestricted net assets, and rapidly rising debt. While Standard & Poor's considers the 2009 debt burden of about 5.3% manageable, there are expected capital and debt plans as well as significant nonpension, postemployment liabilities.
"The stable outlook reflects our expectation that the university's positive enrollment and demand trends will continue and that financial resources will remain adequate for the rating category," said Standard & Poor's credit analyst Suleman Souleyman. "It also reflects our expectation that the university's operations will follow or exceed management's plan to return to balanced by 2012 on a budgetary basis, and that future capital plans will not significantly raise debt," said Mr. Souleyman.
Any combination of a rapid rise in debt, or failure to show steady progress in eliminating operating deficits could result in negative rating actions.
The university is issuing $9 million series 2010A bonds in fixed-rate, taxable, general revenue Recovery Zone Economic Development Bonds that mature in 2044. The series 2010B bonds will refund about $22 million of the series 1998 bonds and pay for the cost of issuance. Post issuance, the University of Vermont (UVM) should have about $500 million in debt outstanding.
RELATED RESEARCH
General Criteria: "Enhanced Methodology And Assumptions For Rating Government-Related Entities," June 29, 2009
USPF Criteria: "Higher Education," June 19, 2007
Complete ratings information is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
David Wargin, New York (1) 212-438-1579,
[email protected]
Analyst Contacts:
Suleman Souleyman, Toronto (1) 416-507-2514
Marc Savaria, Boston (1) 617-530-8315
Key Contacts:
Americas Media Relations: (1) 212-438-6667
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Americas Customer Service: (1) 212-438-7280
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