Standard and Poor’s Financial Service (S&P), one of the nation’s premier credit rating services, has revised The University of New Mexico’s long-term rating by one level, from “AA” to “AA-.” At the same time, S&P also revised UNM’s rating outlook from negative to stable.
The S&P Ratings reflect an institution's ability to repay long-term debt, and is based on financial data for multiple fiscal years including the fiscal year ending in 2019. The report commended the University’s “low debt burden, healthy resources, essential role as the state’s flagship public university and major healthcare provider, its diverse revenue and large scope of operations….”
For the University, factors such as lower state appropriations and continued declines in enrollment have prompted S&P to lower its rating on the debt issued on behalf of UNM to “AA-” from “AA.”
The report offers that a revision to the rating could occur based on the following: “FTE enrollment begins to show a trend in growth, operations continue to improve, and debt and financial resources remain stable or improve further.”
“While a downgrade of any kind is never welcome, the University still has one of the highest ratings of any higher education institution in New Mexico” said Teresa Costantinidis, Senior Vice President for Finance and Administration. “The stable outlook along with the potential of the opportunity scholarship if passed bode well for the University to reverse the enrollment trend.”
The bond rating is an important process because the rating alerts investors to the quality and stability of the entity’s bond debt, influences bond pricing and interest rates on future issues, and plays a role in investment reception. Higher rated bonds, known as investment grade bonds, are seen as safer and more stable investments. UNM’s bonds remain in the highest quadrant of investment grade rating.
Although the revised rating may cause the University to pay slightly higher interest the next time it issues bonds, UNM believes this impact will be minimal because AA- is still a very strong rating.
This story was updated on 10/30 to reflect a more accurate quote from Teresa Costantinidis.