Moody's to downgrade UA's credit rating

ANCHORAGE (KTUU) - The University of Alaska (UA) is on review for downgrade, according to Moody's Investors Service.

Moody's posted the rating action on its website.

In a phone interview with KTUU, Sen. Bill Wielechowski said that one of the reasons he was given for the downgrade in the credit rating was the Board of Regents' decision not to declare financial exigency.

"By doing that they would have been able to act much quicker," he said. "And so the university regents are not making the situation better by letting this languish."

In a press release, UA acknowledged as much. The press release states that "If the Board of Regents votes to declare financial exigency, allowing more rapid downsizing, it would not impact today’s downgrade, Johnsen said, but it could change Moody’s outlook for UA to be more favorable."

Moody’s will downgrade UA three notches from A1 to BAA1 with a negative outlook. UA is now the second lowest-rated flagship university in the nation. Puerto Rico is the lowest.

In its statement, Moody's said that the review was a direct result of recent budget vetoes. Moody's says "there is a high likelihood of a material reduction in the university's liquidity over the next year as it uses cash to fund programs pending restructuring of operations, and for the associate costs of that restructuring."

It also says that UA's reputation as a university is affected.

"UA's strategic position has been materially impaired by this funding reduction, as well as a cut to the state's financial aid programs, and we expect a multi-year negative impact on enrollment, which was already declining, as well as the competitive position of University of Alaska's research enterprise," it writes.

Sen. Wielechowski responded to the news on Facebook.

On the phone with Channel 2, he said he really wasn't a surprise after the vetoes, but that he believed that it runs counter to the governor's goal of making the university more self-sufficient.

"The state is cutting funding, saying that they need to be more self sufficient but at the same time moody's is now downgrading, making it much harder and much more expensive for them to go out and raise funds to fund the university," he said "It sort of creates this spiral for the university that makes it really hard for it to really fund things, to be able to go out and bond things and pay for things.

UA says that several bonded projects will likely be affected.
A press release says that "UA currently has financial indebtedness on several of its buildings including the UAF Engineering Building, the UAA University Center and the UAF Power Plant."

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