The University of Central Arkansas has received another credit boost from Moody’s Investors Service.
Moody’s revised the university’s debt-rating last week from Baa1 to A3. This is the second upgrade by Moody’s in the last five months.
The recent change in the university’s rating is due to a recalibration of the ratings by Moody’s. Moody’s has been using a separate rating scale for U.S. municipalities and is now recalibrating its U.S. municipal bond ratings to be in line with those that it issues for corporate debt, said Edmond Hurst, senior managing director, Capital Markets Group, Crews & Associates, Inc.”The municipal ratings have historically been rated lower than comparable corporate credits,” he said. “As a result, lawmakers and other market participants complained that the old rating scale was unfair.”
UCA officials said the recent boost also is a vote of confidence in the solid financial management progress that the university is exhibiting.
“This recognition of our financial progress over the last nine months will allow UCA to continue to strengthen its financial portfolio, said UCA President Allen C. Meadors.
Previously, the university’s debt-rating was negative following the downgrading of its score twice in late 2008. Moody’s upgraded UCA’s rating in February to stable. A statement from the company in February said the stable outlook reflected “expectations of a gradual improvement in cash and financial resource levels, management’s ongoing successful implantation of cash flow enhancement efforts and continued support from the state.”
UCA ended the 2008 fiscal year with a negative $4.3 million. It ended the fiscal year in 2009 with a cash balance of $3.2 million. Officials expect a nearly $10 million balance the end of the fiscal year 2010.
“We are very encouraged with UCA’s upgrade to A3 from Baa1,” said Diane Newton, vice president of finance and administration. “This may allow the university to refinance some of its existing debt to lower interest rates and provide us with a lower cost of capital for future projects.”
To hear further comments from Diane Netwon about the credit rating and the university’s finances visit UCA’s YouTube page.
