University of Alaska credit rating downgraded
According to a statement from Moody’s Investment Service, University of Alaska General Revenue Bonds have been downgraded from A1 to BAA1. The Series 2012 Lease Revenue Bonds downgraded from A2 to BAA3.
The outlook for both the general revenue bonds and the lease revenue bonds is negative. The negative outlook reflects execution risk as University of Alaska implements significant changes due to the 40% cut in the university’s appropriations from the State of Alaska for the current fiscal year, 2020.
According to Moody’s, the university is facing immediate operational and liquidity challenges as a multi-year period of redefinition. With significant uncertainty around the pace of action and resulting impact on financial results and liquidity, future rating actions could continue. Some factors that could lead to further downgrade are the inability to act quickly without depleting liquidity, and a reduced willingness to honor debt or other contractual obligations.
Currently, the General Revenue Bonds are with $270 million outstanding, and the Series 2012 Lease Revenue Bonds are with $23 million outstanding. Factors that could lead to an upgrade, however, include demonstrated ability to quickly and sustainably respond to funding reductions without depleting liquidity or through restoration of stronger state support or through strengthening of other funding streams, such as tuition revenue and philanthropy.
In a statement released by the University of Alaska, UA President Jim Johnsen said if the Board of Regents votes to declare financial exigency, allowing more rapid downsizing, it would not impact today’s downgrade, but it could change Moody’s outlook for UA to be more favorable. With the downgrade of three points, the University of Alaska is now the second lowest rated flagship university in the nation.