The University of Hawaiʻi has great credit and is a high quality investment according to Moody’s Investors Service, one of the nation’s most respected credit agencies. A credit opinion report issued on April 21 by Moody’s (PDF) affirmed the agency’s rating of UH at an ‘Aa2’ rating level, the third highest available from the agency. The agency also raised its outlook of the university from ‘negative’ to ‘stable.’ The rating and outlook affirm a sentiment that UH credit should be considered of high quality to investors, with very low risk in long-term ratings. UH is also considered to have the best ability to repay short-term debt for a Prime 1 short-term rating, the highest possible in that category.
The rating takes into account UH’s large scale and scope of operations, distinctive programming and research and diversified revenues. The university’s outlook was elevated to stable by Moody’s in their April 2017 report (PDF), which reflects an improving operating cash flow as a result of enhanced system oversight and heightened budgetary controls.
- Related: Moody’s rating system in brief (PDF)
“The university’s rating highlights our financial stability, which is extremely important because it shows that we are a worthy investment,” said Kalbert Young, vice president of budget and finance and CFO of the UH System. “As we continue to improve our financial and fiscal structure at the university, the improved stability will allow us to equally refine our long-term strategic planning to address larger financial and enrollment challenges, as well as improve deferred maintenance across the 10 campuses. Elevated credit levels validates that we are moving in the right direction towards both addressing university issues and in assuring investors.”
UH’s Aa2 rating reinforces its essential role in the State of Hawaiʻi as the sole provider of public higher education with a unique research enterprise and as an economic driver within the state. Moody’s also identifies strong support and the strength of the State of Hawaiʻi’s credit as a factor, which is one notch above UH’s at Aa1. Steady state operating and capital support contribute to the university’s credit strength. UH manages a relatively stable debt burden due to state support and consistent amortization, paying off debt with a fixed repayment schedule in regular installments over a period of time. Approximately 42 percent of the university’s outstanding revenue bonds have an additional pledge of revenue from the state equal to debt service.