Moody’s Investors Services, a global credit rating company, has reaffirmed the University’s credit rating on $2.3 billion of bonds as Aa2, indicating that its bonds are relatively low-risk. Moody’s also rated the University’s $683 million of debt as VMIG 1, indicating superior credit quality. According to Moody’s, the University’s credit rating outlook is “stable,” indicating that there is likely to be no change in rating in the near future.
The report, released May 15, explained the credit rating by noting that “the University of Chicago’s Aa2 rating reflects its global prominence as an elite research university, notable strengthening of undergraduate demand, demonstrated fundraising prowess for strategic initiatives, and good unrestricted liquidity.”
In analyzing the University’s credit rating, the Moody’s report also noted that “the stable outlook reflects expected strong gift revenue that will ultimately grow balance sheet resources, stable liquidity, and thin consolidated cash flow with rising university and medical center debt service,” according to its website.
The Aa rating indicates that the University’s financial obligations are at the second-lowest level of risk out of nine possible levels, with the lowest-risk level denoted by Aaa and the highest-risk level denoted by C. The 2, assigned on a scale from 1 to 3, denotes that the rating is in the middle of Aa-rated organizations.
Moody’s downgraded the University’s credit rating one sub-level from Aa1 to Aa2 this past summer. This downgrading came in response to the University’s high level of debt and expectations for minimal cash flow in the near future, although the University affirmed that its strategic plan included an increase in debts.
The reaffirmation of the Aa2 credit rating did not take debt from the University of Chicago Medical Center (UCMC) into account, although Moody’s report noted that “adverse changes” in UCMC programming in the future might make the credit rating go down. The UCMC’s Aa3 rating was reaffirmed in late December, although Moody’s had previously threatened to downgrade it, citing the UCMC’s operating cash flow margin.