Moody’s upgrades MSU’s bond rating

Citing an increased student demand, solid financial management and a bright outlook, Moody’s Investors Services has upgraded its rating of Montana State University bonds to A2 from an A3.

The upgrade came as Moody’s reviewed $17.5 million in MSU facility bonds that will be refunded later this month. The refunding of bonds is similar to refinancing home loans.

According to an analysis released last week by the national financial services firm, the reason for the upgrade included MSU’s "position as a leading system for higher education within the state with rebounded student enrollment; diversified revenue streams enabling the university to adjust to a continued weak state funding; and adequate levels of reserves with manageable debt and moderate identified borrowing plans."

The bond rating upgrade was good news to university officials, particularly because it signals a fiscal turnaround from a few years ago when the university was burdened by debt.

"(The upgrading of the bonds) is a flattering recognition of the hard work MSU has done recently in tightening its fiscal controls, expanding its revenues, diversifying its revenue sources and determining its own future," said Craig Roloff, MSU’s acting vice president of administration and finance. "We understand that we won’t be able to draw any significant increase in funding from the state during its time of fiscal challenges." Roloff said that in many ways the positive report recognizes "the success of the vision and the focus that Geoff (Gamble) has established for the university."

The review issued with the upgrade hints of the potential of another upgrade "if the university is able to continue its recent trend of enrollment and research growth while limiting debt and growing reserves." The review is particularly flattering of MSU’s $82 million of research funding in fiscal year 2003.

"These are quite strong levels for an institution that does not operate a medical school. Sources of funding are relatively well-diversified over federal, state and private sources," according to analyst Susan Fitzgerald of Moody’s.

Points of concern mentioned in the review include a comparatively small university endowment and an unusually weak percentage of state funding. The report mentions that MSU derives just 27 percent of its budget from the state with state appropriations per student totaling just over $5,300.

"This compares to a median state appropriations per student of $7,300 for all Moody’s-rated public institutions across the U.S," Fitzgerald said in commending MSU for maintaining strong finances in the state’s current economic environment.

Moody’s "very positive statement" was issued to fund managers, investment houses and The Wall St. Journal as well as financial underwriters. Later this month MSU will refund 1993 and 1994 bonds that are secured by student housing revenues, various student fees and other revenues. The release, posted Aug. 1, is available to subscribers on Moody’s website: http://www.moodys.com/ .

http://www.montana.edu/commserv/csnews/nwview.php?article=1208