University’s Bond Rating Gets Double Boost
Moody's and Standard & Poor's cite strong operating performance and investment returns
Boston University’s bond ratings, which indicate the University’s credit standings and affect interest rates on existing debts, were upgraded last week both by Moody’s and by Standard & Poor’s, the two largest rating agencies in the world. Standard & Poor’s upgraded BU’s long-term rating to A-, up from BBB+, while Moody’s maintained the A3 rating but revised the outlook from “stable” to “positive.” These agency reviews were undertaken in connection with the University’s planned issuance of a bond financing in late March.
Both reports cited increased student interest, a strong operating performance, and the recent good returns on the University’s endowment as reasons for the upgrade. The Standard and Poor’s report also noted the 2007 hiring of a chief investment officer to help build an Investment Office for the management of the endowment, which is currently at $1.2 billion.
“I think it’s a validation of the strategic plan that President Robert Brown has put forth, and the progress that has been made to date,” says Martin Howard, BU’s vice president for financial affairs and treasurer. “They’ve recognized that we have had strong operating results over time, with a prior funding emphasis on the creation of a physical campus, and that we are now at a point where more resources can be directed toward the human capital and academic infrastructure of the institution.”
Howard also noted that the Standard and Poor’s upgrade to A- is the equivalent of the Moody’s A3 rating, ending the University’s split rating for the first time in years. The prior BBB+ rating had been in effect since 1997.
Both agencies identified BU’s debt burden of $1.2 billion as a potential challenge to the University’s rating, but both also noted that the debt profile is based largely on the campus improvements of the past 10 years, and that the University has no additional debt plans in the near future.
“The positive outlook is based on Moody’s expectation that Boston University’s new leadership will successfully implement an enhanced fundraising strategy and sustain a long history of favorable operating performance,” the Moody’s report stated.
The Standard and Poor’s report said that “the stable outlook reflects our expectation that the university … will have a successful capital campaign, and demand will remain strong.”
Jessica Ullian can be reached at jullian@bu.edu.
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