Financing Strategy Backs ‘Triple-A’ Rating, Sustainability, Affordable Excellence

The University of Virginia this month will complete a major bond issuance and related restructuring of its debt designed to support operations and key elements of U.Va.’s strategic plan, including the new Affordable Excellence program adopted by the Board of Visitors in March.

Included in the $291.6 million of refunding bonds is the University’s first issuance of “green bonds,” which support environmentally sustainable projects and help to create innovative strategies to meet the goals of U.Va.’s Sustainability Plan. Socially conscious investors bought $97 million in U.Va.’s initial offering of green bonds.

It’s believed to be the largest issue of “green bonds” by a public university to date.

Direct results from the bond issues include lowering the long-term cost of the University’s entire debt portfolio from 4.21 percent to 4.13 percent, and  reducing liquidity risk in the bond portfolio. 

“The careful and creative management of our balance sheet will generate revenue that the University can deploy in support of priorities and to address incremental increases in operating costs,” Executive Vice President and Chief Operating Officer Patrick Hogan said. “This is a critical component of Affordable Excellence, which is U.Va.’s new financial model that will assure that we can sustain excellence and affordability into the future.”

Affordable Excellence is U.Va.’s commitment to students and families that a U.Va. education will remain affordable and among the best, while also significantly slashing the amount of indebtedness that Virginia families may face. The financial model also identifies sustainable funding to support a new generation of faculty and components of the Cornerstone Plan, U.Va.’s strategic plan.

In advance of the financing, all three major credit rating agencies – Fitch, Moody’s, and Standard & Poor’s – reaffirmed the University’s coveted “triple-A” long-term debt rating, a key to U.Va.’s ability to save millions in interest by securing the most favorable terms available to institutions with the top ratings.

With this reaffirmation, the University continues to be just one of two public universities in the country to receive “triple-A” ratings from all three major credit rating agencies.

In announcing their ratings, the agencies cited most the University’s operating performance, diverse and academically strong students, the strength of U.Va.’s endowment, its continued donor support and the University’s strong management approach to strategic planning and effective risk management.

The University has accomplished its objectives related to the bond issue by taking advantage of historically low interest rates, reducing liquidity risks and moving toward a better match of short-assets and short-term liabilities, Associate Vice President and Treasurer Jim Matteo said.

Matteo is responsible for the University’s debt portfolio management, banking and cash management, short-term investment and liquidity management, and administering the relationships between the University and its various affiliated foundations.

“The University has long been recognized for its sound fiscal management as evidenced by our ‘AAA’ ratings. The actions we’ve taken with our debt portfolio, and with our balance sheet in general, will allow us to leverage our strong financial standing in support of the Cornerstone Plan,” Matteo said.