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University of Alaska credit ratings downgraded due to cuts

July 18, 2019

FAIRBANKS, Alaska (AP) — The University of Alaska’s revenue bond ratings have been downgraded after a cut in state funding, a report said.

Moody’s Investors Service announced the rating decreases Wednesday, citing the “unprecedented” single-year reduction, The Fairbanks Daily News-Miner reported Wednesday.

The downgrade for revenue bonds and lease revenue bonds “reflects the severity and magnitude of the financial challenges confronting University of Alaska following an over 40% cut in the university’s appropriations” from the state for fiscal year 2020, Moody’s said.

The company downgraded University of Alaska general revenue bonds from A1 to Baa1, with $270 million outstanding. The university’s Series 2012 Lease Revenue Bonds were downgraded from A2 to Baa3, with $23 million outstanding.

The Baa1 rating indicates to potential investors that the investment is subject to moderate credit risk and may possess speculative characteristics. Baa3 is the lowest investment-grade rating and also indicates moderate credit risk.

Moody’s is one of three major credit-rating agencies, along with S&P and Fitch Ratings.

The rating changes demonstrate the university’s argument that the state’s 41% budget cut of $136 million “continues to harm us every day,” said UA President Jim Johnsen.

“Moody’s downgrade harms our ability to bond or borrow money at favorable interest rates and to be viewed as financially stable,” Johnsen said.

The university system has financial indebtedness on several of its buildings including the University of Alaska Fairbanks Engineering Building and Power Plant and the University of Alaska Anchorage University Center, according to a university statement.

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Information from: Fairbanks (Alaska) Daily News-Miner, http://www.newsminer.com

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