Despite previously rating the University of Arizona as “credit positive,” Moody’s Investors Service, a nationwide bond credit rating business, has changed its outlook on the school to “negative.”
“The revision of the outlook to negative is driven by uncertainty around the pace of the university’s operating performance recovery following identification of a structural imbalance along with continued integration risk associated with the University of Arizona Global Campus,” the report from Moody’s, dated March 4, reads.
Moody’s, along with Standard & Poor’s and Fitch Group, is considered one of the “Big Three” credit rating agencies and has national prominence.
The ratings agency wrote that the “inability to right size operations in a relatively short period of time,” and “turnover in management, recent evidence of weaker financial monitoring, and ongoing governance scrutiny,” were among the reasons for the change.
In a statement to the Star, a spokesperson for the UA said that "the ongoing implementation of our financial action plan will assure the University of Arizona can stand on solid financial footing for decades to come."
She added: "Our current actions are ensuring the university will continue providing outstanding educational experiences for our students, research that drives economies and improves lives, and outreach that benefits millions."
According to the report, the UA recorded $1.6 billion in debt and leases for fiscal year 2023, as well. Moody’s believes that the university’s operating performance “is likely to remain weak through fiscal (year) 2024 while the university implements expense reductions, hiring and payroll freezes and tighter fiscal monitoring.”
The credit challenges include weakening fiscal operations heightened by increased governance scrutiny, modest and thinning liquidity relative to peers, emerging risks associating with UAGC and “very high leverage” relative to wealth and revenue, the report states.
Moody’s stated that it could upgrade the ratings if the university made substantial improvement in financial resources relative to debt and significant and sustained increase in available reserves to over 200 monthly days cash on hand.
The rating could be downgraded even more, the report states, with a further deterioration of financial reserves, sustained weak and volatile operating performance, inability to improve financial reporting and monitoring and prolonged period of governance instability.
