IU credit ratings again in the top tier of public universities
For Immediate Release
May 24, 2018
BLOOMINGTON, Ind. – Indiana University continues to hold the highest credit ratings available from both S&P Global and Moody’s Investors Service. S&P rated IU AAA, and the university is rated Aaa by Moody’s.
IU is among an elite group of only seven public universities in the nation to achieve these highest ratings from both agencies. S&P and Moody’s reaffirmed IU’s long-term AAA and Aaa ratings this month and issued their highest available short-term ratings, A-1+ and P-1, to the university as well.
S&P cited IU’s multi-campus system, large and stable enrollment profile, positive financial operations, excellent fundraising record, and exceptional fiscal planning among the reasons for the AAA rating. Moody’s offered similar positive feedback, writing in its report, “the stable outlook reflects expectations of strong student demand and research activity, adequate operating cash flow, ample liquidity and moderate additional debt.”
“It’s great to see that the work done throughout our institution to ensure we remain financially strong is recognized by these two agencies with their highest available ratings,” said Don Lukes, IU treasurer. “A university with a healthy financial profile allows us to keep tuition low for our students while maintaining a high-quality education.”
An additional benefit of achieving high short-term credit ratings in particular is the ability to establish a commercial paper facility. This allows an organization to use commercial paper, a short-term debt option with lower interest rates, to finance projects before issuing long-term bonds. IU launched a $100 million commercial paper facility on May 22.
“This facility will provide interim financing for several projects, including the new Regional Academic Health Center, Wilkinson Hall and the golf course renovation on the Bloomington campus as well as IUPUI’s Multidisciplinary Research and Classroom Building,” Lukes said. “Because we are able to use commercial paper to finance projects during construction and then issue long-term bonds when the projects are complete, we’re reducing the amount of debt service that needs to be paid during construction. This will save the university more than $5 million per year.”
IU has held S&P’s AAA rating since 2016 and has been rated Aaa by Moody’s since 2010. The fact that IU offers a number of initiatives supporting student affordability and financial literacy with the goal of reducing student debt, along with IU’s risk-management strategies, demonstrates sound financial management. These are among the many factors the rating agencies take into account when determining a university’s credit rating.
Other public universities rated AAA by S&P and Aaa by Moody’s are Purdue University, University of Michigan, University of Texas, Texas A&M, University of Virginia and University of North Carolina-Chapel Hill.