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Ratings put U.Va. in financial elite

By Charlotte Crystal

Standard & Poor’s has just upgraded the University to a triple-A debt rating, making U.Va. one of only two public universities in the country — along with the University of Texas — to hold the coveted ranking from all three of the financial world’s major bond-rating agencies.

“It’s always a big accomplishment to be upgraded, but it’s especially significant in this economic environment,” said Yoke San L. Reynolds, U.Va. vice president for finance.

Standard & Poor’s raised its rating from AA+ to AAA on the University’s outstanding debt, joining Fitch Ratings and Moody’s Investors Service in assessing the quality — and relative safety — of an investment in U.Va. bonds as the best there is.

Only two private universities have been rated triple-A by all three services, Dartmouth College and Stanford University, although many private institutions have sought ratings only from Moody’s and S&P, Reynolds said.

“The decisions of the rating agencies reflect an assessment of the entire institution,” said Leonard W. Sandridge, executive vice president and chief operating officer. “The performance of our staff, the leadership of the president and the board, the quality of our academic and health care programs, our endowment, the successful capital campaign and the effectiveness of our financial and business operations all contribute to the strength of the enterprise.”

U.Va. solicited the debt ratings, all released in late February, as it prepared to issue $200 million in bonds to cover some of the costs of seven capital projects and refinance existing, more expensive debt. On March 5, Lehman Brothers led a consortium of investment banks in selling $118 million of Series 2003B bonds at maturities ranging from one to 30 years, and at annual interest rates from 1.05 to 4.71 percent.

All $118 million of the U.Va. bonds sold in one day, Reynolds said, thanks to the University’s reputation, good pricing and a good marketing strategy on the part of the investment bankers. The last time U.Va. went into the bond market was in 1999, making U.Va. bonds a rare commodity.

“We don’t borrow that often and when we do, we’re a quality brand on the market,” Reynolds said.

S&P’s AAA rating covers not only U.Va.’s existing debt, but also the recent $118 million issue. The bonds will be repaid through student tuition and fees, auxiliary revenues such as parking and bookstore sales, and unrestricted gifts.

The seven capital projects include an addition to the aquatic and fitness center, renovation of the cancer center, expansion of the U.Va. hospital, construction of a parking garage on Emmet Street, a research building for the School of Medicine, a basketball arena and a dining hall on Observatory Hill.

Of the bond proceeds, $85 million will be used to repurchase existing debt for reissue at a lower interest rate, saving the University about $700,00 a year in interest payments, or an expected total of $7 million at present values, Reynolds said.

“U.Va. has always had fairly strong leadership,” said John Fargnoli, a director with Standard & Poor’s public finance division. “The upgrade was due largely to the school’s strong reputation and the improvement in its finances and increase in research funding.”


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