S&P upgrades U-M's bond rating

Citing U-M's strong financial position and its national reputation for excellence in academics and research, Standard & Poor's (S&P) Ratings Services raised in January its rating on U-M's outstanding bonds secured by general revenues to "AAA," their highest grade.

The University's rating was increased from "AA+." The service also upgraded the University hospitals' bonds from "AA" to "AA+."

Another major investment rating service, Moody's Investor Services, again assigned U-M its highest "Aaa" rating. Moody's upgraded U-M from "Aa" to "Aaa" in 2000.

U-M is only the third public university in the country to be upgraded by S&P to its highest rating, along with the universities of Texas and Virginia, says Timothy P. Slottow, executive vice president and chief financial officer.

"These ratings will reduce our cost of debt in the market," Slottow says. "This will reduce expenditures over the long run, freeing up money for academic priorities. The upgrade also sends a signal to all University stakeholders about our successful ongoing focus on financial controls, budget discipline and best practices in financial management."

The rating agencies take many factors into account in evaluating the financial risks associated with the University's activities, Slottow says.

"A AAA rating shows that the rating agencies consider U-M to be of the highest possible credit quality—and lowest possible risk—for investors in the bond market," he says.

The upgrade is based upon the University's excellence in academics and research, exceptional student demand and a strong record of fund-raising, according to S&P.

"The ratings also reflect historically good investment performance, a strong balance sheet, and manageable debt burden and 10-year capital plan," S&P noted in its announcement.

U-M has been very aggressive in controlling costs, Slottow says.

"The rating agencies understand that the University is operating in a difficult period for the state economy and that we've made significant budget adjustments without decreasing academic excellence," he says.

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