Debt Ratings for University System of Maryland Remain Strong as USM Launches New Bond Issue
Md. (Feb. 1, 2017) -- The nation's three principal bonds ratings
agencies--Standard & Poor's, Moody's, and Fitch--have informed the
University System of Maryland (USM) that the USM will maintain its
traditionally high ratings with the issuance of $167.2 million in auxiliary
facility and tuition revenue bonds.
series of bonds, USM has received high ratings of AA+ from Fitch Ratings, Aa1
from Moody's Investor Services, and AA+ from Standard & Poor's. All three
ratings services give USM an outlook of "stable." There are eight
public universities with the highest rating of AAA, and 12 with Aa1, including
evaluations are significant because they reflect positively on the USM's sound
financial stewardship, despite an overall economic climate nationally that has
challenged colleges and universities in recent years.
strong ratings allow the USM to minimize the costs of borrowing. The strong
ratings for this latest bond issue will result in reduced future and principal
interest costs by more than $4 million.
million bond sale entailed $115 million in new proceeds from Series A revenue
bonds, from which proceeds will fund new and recent capital spending, and $52.3
million in the refunding of Series B bonds.
The auction of the new money Series A bonds resulted in a
True Interest Cost (TIC) of 3.14%. This compares with the Municipal Market Data
(MMD) index of 20-year, tax-exempt, AAA-rated government bond interest rates of
3.19%, meaning that the USM's debt traded at a rate 5 basis points lower
than a AAA-rated governmental entity.
(The TIC is a measure of financing cost that takes into
account the actual cost of issuing a bond and the sale-price premium bond
purchasers were willing to pay for USM bonds. A lower TIC represents a cost
savings to the institution issuing a bond, since the institution will owe a
reduced amount of interest owed to bondholders.)
The auction of the refunding Series B bonds resulted in a
True Interest Cost of 1.56%, which produced a Net Present Value savings of $4,540,054,
or more than 8.3% of the refunded debt.
benefits from an effective partnership with the administration of Gov. Larry Hogan
and the Maryland General Assembly.
support of the USM's mission as a system of public higher education has
resulted in affordable tuition, support of key initiatives, and construction of
important capital improvement projects on campuses to support current students
and attract prospective students.
Chancellor Robert L. Caret and Joseph Vivona, USM's chief operating officer and
vice chancellor for administration and finance, led the meeting regarding this
bond issue with the ratings agencies in New York.
consistently sound ratings from the bond agencies reflects quite well on the
soundness, efficiency, and overall economic health of the University System of
Maryland," Caret said. "The system continues to benefit from the leadership of
our Board of Regents, the thorough preparation by Joe Vivona and his staff, and
a year-round practice of solid management at each of our campuses."
responsible management of financial resources helps the USM to pursue its core
missions in teaching and research.
Contact: Mike Lurie