info

Yes No
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Enter the above code here:
Can't read?
Try a new set
Send Cancel
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
OK
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
OK
Rating Action:

Moody's downgrades University of Illinois' ratings; outlook negative

Global Credit Research - 09 Aug 2013

Total $1.56 billion debt affected

New York, August 09, 2013 -- Moody's Investors Service has downgraded the University of Illinois' ("UI") long-term ratings -- specifically to Aa3 from Aa2 on its Auxiliary Facility System Revenue Bonds (AFS) and Certificates of Participation (COPs), to A1 from Aa3 on the South Campus Development Bonds, and to A2 from A1 on the Health Services Facilities System (HSFS) Bonds. The rating action affects $1.56 billion of debt. The outlook for all ratings is negative. We have affirmed the VMIG 1 ratings on the Variable Rate Demand Auxiliary Facility System Bonds, Series 2008 and Variable Rate Demand Certificates of Participation (Utility Infrastructure Projects), Series 2004 bonds based on standby bond purchase agreements. The downgrade reflects the university's moderately high reliance on the State of Illinois (GO A3 negative) which for many years in succession has delayed the payment of annually appropriated funds. The negative outlook is based on the risk of ongoing appropriation pressure.

Today's action concludes the review for downgrade initiated on June 10, 2013.

SUMMARY RATING RATIONALE

The Aa3 rating for University of Illinois' AFS bonds and COPS reflects its standing as the state's flagship university with strong student demand and as a leading national research university, strong liquidity and growing balance sheet resources supporting debt and operations. The university's broad revenue base from student charges, research and other sources mitigate the reliance on state funding for direct and "on behalf" payments and enhances UI's ability to absorb reductions or significant delays in state funding. The rating also incorporates the reliance on the A3-rated State of Illinois for over 30% of total operating revenues (FY2012).

The lower ratings on the South Campus Development bonds (A1, negative) and the Health Services Facilities bonds (A2, negative) reflect narrower pledged revenues and some additional pressure on the revenue streams supporting those bonds.

Pledged revenues for all securities provide solid support of debt service requirements. For additional information on the specifics of each security structure, see Moody's report dated April 22, 2013.

The negative outlook for all the bonds reflects UI's significant reliance on state funding for operations and the anticipated negative impact on the university from continued state funding delays or reductions. The negative outlook for the HSFS bonds also incorporates revenue pressures from federal and state funding for Medicare and Medicaid. The negative outlook for the South Campus Bonds additionally reflects pressure on tax increment revenues supporting the bonds.

CHALLENGES

*The university relies on the State of Illinois for a significant portion of its operating revenues. The state has for multiple years in succession delayed payments of annually appropriated funds, necessitating careful liquidity and expense management.

*The university is vulnerable to the impact of pension reform at the state level. If pension reform is passed, UI may need to fund a portion of its pension expense, possibly as early as FY 2015. If pension reform fails to be enacted, we expect continued pressure on state operating appropriations.

*Ownership and operation of University of Illinois Health Services Facilities System (A2, negative), including its academic medical center, University of Illinois Medical Center, exposes UI to healthcare risks. The medical center serves a substantial under-served population, resulting in a 30% Medicaid payor share of revenues. Patient care revenues represented 17% of FY 2012 total operating revenues.

*The university is developing capital and debt plans for the next two to three years, including upcoming plans for the health system.

STRENGTHS

*University of Illinois is the state's flagship and land grant public university and member of the Big 10 athletic conference, with enrollment of nearly 77,000 full-time equivalent (FTE) students. Strong demand for the university combined with a healthy draw of non-resident students and a significant graduate student population will enable the university to further increase tuition revenues if necessary to mitigate state funding pressures.

*A leading national research university, UI generated a significant $710 million of total research expenditures for FY 2012 and has been able to sustain its research profile despite broader pressures on research funding.

*UI maintains strong and growing liquidity with $1.86 billion in unrestricted monthly liquidity and $723 million in unrestricted cash as of 6/30/2012. This provides it with significant flexibility to withstand operating disruptions and has enabled the university to manage the delayed payments from the state.

*Operations and cash flow have strengthened despite the constrained state funding environment, due to proactive management at the university. The university achieved an 8.0% average operating margin for FY 2010-FY 2012 and a 13.9% operating cash flow margin for FY 2012. The university reports continued positive operating performance for FY 2013.

*UI has demonstrated notable fundraising success, with $181.2 million of average gift revenues for FY 2010-2012 and $198.4 million reported for FY 2012 alone.

OUTLOOK

The negative outlook on all the bonds is based on the potential of continued reduced or delayed state funding. The negative outlook for the HSFS bonds additionally reflects revenue pressures from federal and state funding for Medicare and Medicaid. The negative outlook for the South Campus Bonds further reflects pressure on tax increment revenues supporting the bonds.

WHAT COULD MAKE THE RATING GO UP (RETURN TO STABLE OUTLOOK)

An upgrade of the ratings is unlikely given the magnitude of the state's unfunded pension liability and the resultant expected pressure on the university. A revision in UI's outlook to stable for could be driven by state approval of pension reform in a form that would not significantly impair the university's financial strength.

WHAT COULD MAKE THE RATING GO DOWN

A substantial decline in directly paid state operating support or benefits provided through "on behalf" payments or further deterioration of the state's credit quality indicating that such a decline is likely.

PRINCIPAL RATING METHODOLOGY

The principal methodology used in this rating was U.S. Not-for-Profit Private and Public Higher Education published in August 2011. An additional methodology used in the short term rating was Variable Rate Instruments Supported by Conditional Liquidity Facilities published in May 2013 and an additional methodology used in the UIC South Campus Development Project rating was US Public Finance Special Tax Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Diane F. Viacava
VP - Senior Credit Officer
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Karen L Kedem
Vice President - Senior Analyst
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades University of Illinois' ratings; outlook negative
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATION") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

 


ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

 


All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s Publications.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

 


NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

 


MIS, a wholly-owned credit rating agency subsidiary of Moody’s Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.
© 2014 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: