Standard & Poor’s and Moody’s Investment Service issued high credit ratings to AU’s business practices, according to President Neil Kerwin’s Jan. 23 memo.
These high credit ratings demonstrate to any institution loaning money to AU that the University will likely pay back the loans reliably. Loaners to AU include JP Morgan and Wells Fargo, according to Doug Kudravetz, AU’s associate vice president of finance and assistant treasurer.
The university’s positive credit ratings follow a positive fiscal trend for the University, Kudravetz said.
“We are cautiously optimistic that the university’s financial health will continue to prosper,” he said. “We made it through the financial crisis of 2008-2009 in great shape. As a matter of fact, we were one of only two private universities that S&P upgraded in 2009.”
Standard & Poor’s issued an A-1 short-term credit rating to the University, the highest rating issued by the agency, according to Kerwin’s memo.
This short-term credit rating demonstrates that AU has a low likelihood of defaulting on its loans within the next year.
Moody’s maintained the University’s A-2 long-term credit rating, while upgrading the University’s credit outlook from stable to positive, Kerwin said.
A positive credit outlook means that Moody’s will likely be able to upgrade AU’s credit rating in the future.
Kudravetz said Standard & Poor’s issued a long-term rating of A+ to the University.
“Our ratings are very strong at the A+ and A-2 levels, as a matter of fact [they are] stronger than many banks,” Kudravetz said in an email.
The purpose of receiving a short-term rating was to pursue a commercial paper program. This was the first short-term credit rating issued to the University, Kudravetz said.
Commercial paper is a short-term loan issued for 30 to 270 days that can be reissued on a regular basis, according to Kudravetz.
Kudravetz said commercial paper programs allow institutions to borrow money at low interest rates. High short-term credit ratings make it easier for institutions to loan money under a commercial paper program, he said.
Kudravetz said the high short and long-term ratings from these agencies will allow AU to implement a commercial paper program for the Campus Plan construction projects.
Kudravetz said University endowments are performing well and that AU is acting to ensure that it maintains adequate financial reserves.
pburnett@theeagleonline.com
