Budget cuts to 麻豆传媒 results in Moody鈥檚 three-step downgrade to 麻豆传媒鈥檚 credit rating

July 17, 2019

The credit rating committee of Moody's Corporation decided earlier today to of the 麻豆传媒 from its current A1 rating to Baa1 with a negative outlook. In informing the university of the action, the committee said the downgrade is a result of the 鈥渕aterial impairment鈥 on the university鈥檚 financial outlook as well as the 鈥渟ignificant execution risk,鈥 caused by the significant reduction in state funding.

The decision drops 麻豆传媒鈥檚 credit by three notches, which now makes 麻豆传媒 the second lowest rated flagship university in the nation.

鈥淭his is a direct result of the state鈥檚 budget cut and demonstrates what we have been saying -- the 41 percent [$136 million] budget cut to the university continues to harm us every day,鈥 said 麻豆传媒 President Jim Johnsen. 鈥淭oday鈥檚 news just amplifies the impact of the state鈥檚 funding cut -- Moody鈥檚 downgrade harms our ability to bond or borrow money at favorable interest rates and to be viewed as financially stable.鈥

According to the information provided to the university, there has never been a three-point drop at one time in Moody鈥檚 institutional rating, and, more significantly, a rating of Baa1 is just two notches from being viewed as a non-investment grade debt.

If the Board of Regents votes to declare financial exigency, allowing more rapid downsizing, it would not impact today鈥檚 downgrade, Johnsen said, but it could change Moody鈥檚 outlook for 麻豆传媒 to be more favorable.

麻豆传媒 currently has financial indebtedness on several of its buildings including the 麻豆传媒F Engineering Building, the 麻豆传媒A University Center and the 麻豆传媒F Power Plant.

 

In its rationale for cutting the university budget, the governor鈥檚 Office of Management and Budget cited a 2017 Moody鈥檚 downgrade in 麻豆传媒鈥檚 bond rating. However, that downgrade was precipitated by the state鈥檚 poor financial condition and structural imbalance, and the state received a number of downgrades during that period.