S&P Reaffirms UCM’s Long-term A+ Rating on Revenue Bonds, Notes Financial Pressures

By Jeff Murphy, October 23, 2019

WARRENSBURG, MO – For the third consecutive year, the University of Central Missouri is being  assigned an “A+” long-term rating by Standard & Poor’s (S&P) Global Ratings to the Missouri Health & Educational Facilities Authority’s series 2013C, 2018A and 2018B educational facilities revenue bonds. The rating reflects UCM’s dedication to sound financial operations. Current and future financial pressures on the university, however, are reflected in the S&P “outlook” rating.

“We assessed its (UCM’s) financial profile as very strong, with consistently positive operations on a cash basis, good available resources for the rating compared to operating expenses and debt, and a reasonable debt burden. Combined, we believe these credit factors lead to an indicative stand-alone profile of ‘a+’ and final rating of ‘A+’,” S&P noted in its rationale for the ratings.

It added that the rating reflected the following: healthy available resources, with adjusted unrestricted net assets (UNA) equal to 53.1 percent of adjusted operating expenses and 124.8 percent of outstanding debt; historically sound financial operations, with the university typically producing operating surpluses on a cash basis; and lack of additional debt plans during the outlook period.

"To maintain an "A+" rating for a third consecutive year says a great deal about the campus-wide commitment to good stewardship of our limited financial resources.  While we continue to focus on student success and academic excellence, it is vital that the institution remains financially sustainable.  This rating reflects this sustainability as well as our ability to secure financing for potential future projects that will benefit our students," said Bill Hawley, vice president for finance and administration at UCM.
   
As of June 30, 2019, UCM’s total outstanding debt equals about $84.9 million. This includes $64.1 million of revenue bonds for projects such as construction of the Crossing – South at Holden, UCM’s first student living-retail complex, and an $18.1 million energy savings capital lease issued in April 2009 for deferred maintenance on the main campus.

S&P Global ratings provide a forward-looking opinion about a borrower’s credit worthiness and ability to repay debt using a letter-grade system. “AAA” is the very best rating that can be given for a borrower’s ability to repay long-term bonds. A long-term credit issue rating of “A” means that the organization being rated is more susceptible to adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories, but the borrower’s ability to meet its financial commitments is still strong.

Although S&P is giving the university positive ratings, it also looks to the future taking into consideration the financial impact of factors on the university such as a declining pool of Missouri high school students in which UCM must recruit in competition against other colleges and universities. The pressure on enrollment, which has declined since 2016, led to a “negative” outlook rating.