The University of Connecticut’s bonds have been upgraded to an “Aa3” rating by Moody’s Investors Service, showcasing the strength of UConn’s fiscal management and brand.
Moody’s announcement came with a breakdown on the types of bonds being designated as “Aa3,” including information on the upgrade of existing university “A1” bonds.
“Moody’s Investors Service has assigned a Aa3 rating to University of Connecticut (UCONN), CT’s proposed $50 million of Special Obligation Student Fee Revenue Bonds, 2022 Refunding Series A. Moody’s has concurrently upgraded the university’s outstanding student fee revenue bonds to Aa3 from A1, and affirmed its Aa3 issuer rating. The outlook remains stable. The university had total outstanding debt of about $1.9 billion in fiscal 2021,” Moody’s said in their announcement.
Moody’s and other financial organizations assign ratings to bonds in order for investors to better understand the amount of risk they are taking on. “Aa3” ratings are the “highest” and “strongest” ratings given by Moody’s. While better ratings mean lower profit returns for those investing in the bonds, a better rating also means more stability and less risk overall for the investor.
UConn Spokeswoman Stephanie Reitz said Moody’s upgraded the bonds for many reasons.
“The University’s strong fiscal management, institutional reputation, conscientious financial practices during the COVID pandemic, and continued attractiveness to potential students were cited among factors that prompted the upgrade,” Reitz wrote in a university press release.
“The University’s strong fiscal management, institutional reputation, conscientious financial practices during the COVID pandemic, and continued attractiveness to potential students were cited among factors that prompted the upgrade,”UConn spokeswoman Stephanie Reitz
While an increase in the bond rating will not immediately increase revenue or reduce interest expense on existing debt, a higher rating can increase demand for university bonds and help reduce borrowing costs over time.
UConn uses bonds to help finance large campus initiatives, such as new “academic buildings, research facilities, student housing, or other on-campus initiatives,” according to Reitz.
UConn’s Interim Vice President for Finance and Chief Financial Officer Lloyd Blanchard stated that Moody’s rating increase shows UConn’s growing strength.
“The Moody’s rating upgrade highlights the University’s strong academic and research profile, record student demand, and commitment to our financial bottom line. We are proud to earn this rating upgrade, which we expect will reduce our long-term borrowing costs and allow us to invest additional resources on our students,” Blanchard said.
Connecticut State Treasurer Shawn T. Wooden also emphasized the importance of the bond upgrade.
“Moody’s decision to upgrade UConn’s Student Fee Revenue Bonds is great news for Connecticut. It reflects Moody’s assessment of UConn’s importance to the State of Connecticut as both a research institution and an economic hub,” Wooden said.