Standard & Poor's, a major bond rating agency, upgraded the University's bond rating to the agency's highest level. A reflection of the stronger fiscal standing of the University, the upgrade is contributing to the financing of construction projects across Grounds.
The new rating to AAA from AA+ allows the University to borrow money at a lower cost.
"The higher the rating, the lower the level of perceived risk to investors, and investors are willing to take a lower level of return in exchange for the lower level of risk," said Mary Peloquin-Dodd, Standard & Poor's team leader for Higher Education Ratings.
The University now has the highest possible bond rating from Standard & Poor's, Moody's Investors Service and Fitch Ratings.
The University of Texas is the only other public university to have an AAA rating from all three agencies, and only 12 private universities have a AAA rating from Standard & Poor's.
Standard & Poor's reviewed the University's credit rating at the end of February when the University was looking to issue new debt.
Standard & Poor's generally reviews debt annually or upon a new debt sale, Peloquin-Dodd said.
"All decisions at Standard & Poor's are made by a committee which is comprised of senior analysts who have higher education industry experience," she said.
The University hosted Standard & Poor's representatives as they evaluated the University's financial standing.
"We gave [Standard & Poor's] a tour; we knew they had certain areas of concern, and we brought out managers in those areas," said Yoke San L. Reynolds, University vice president for finance. "We put our best foot forward."
Standard & Poor's saw that the University had made positive changes since their last review, including proving its ability to raise funds, Peloquin-Dodd said.
"The fact that we have diversified our revenues over the last five years was a factor in our favor," Reynolds said.
According to Peloquin-Dodd, the University has been able to operate well despite a weak fundraising environment, a weak overall economy and waning state support. These factors also contributed to the rating upgrade.
The University issued $200 million in debt in March, with a group of investment bankers led by Lehman Brothers, according to Reynolds.
"The AAA rating really allowed us to capture the market," Reynolds said.
Unlike the General Obligation Bond passed by referendum last November, the debt issued in March will be funded by the University itself.
"The General Bond Obligation debt is supported by tax revenues," Reynolds said. "This bond is supported by U.Va.'s revenue."
The money from the bond will fund seven new projects across Grounds and refund existing debt at a lower interest rate.
The bond will provide funding toward an addition to the Aquatic Fitness Center, the new O-Hill dining facility, the new basketball arena, the Emmett Street parking garage, an expansion of the University Hospital, the renovation of the University's Cancer Center and a research building at the Medical School.
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