The credit rating committee of Moody's Corporation decided

earlier today to downgrade the credit rating of the University of Alaska

from its current A1 rating to Baa1 with a negative outlook. In informing

the university of the action, the committee said the downgrade is a result

of the “material impairment” on the university’s financial outlook as well

as the “significant execution risk,” caused by the significant reduction in

state funding.

The decision drops UA’s credit by three notches, which now makes UA the

second lowest rated flagship university in the nation.

“This is a direct result of the state’s budget cut and demonstrates what we

have been saying -- the 41 percent [$136 million] budget cut to the

university continues to harm us every day,” said UA President Jim Johnsen.

“Today’s news just amplifies the impact of the state’s funding cut --

Moody’s downgrade harms our ability to bond or borrow money at favorable

interest rates and to be viewed as financially stable.”

According to the information provided to the university, there has never

been a three-point drop at one time in Moody’s institutional rating, and,

more significantly, a rating of Baa1 is just two notches from being viewed

as a non-investment grade debt.

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.

UA currently has financial indebtedness on several of its buildings

including the UAF Engineering Building, the UAA University Center and the

UAF Power Plant.

In its rationale for cutting the university budget, the governor’s Office

of Management and Budget cited a 2017 Moody’s downgrade in UA’s bond

rating. However, that downgrade was precipitated by the state’s poor

financial condition and structural imbalance, and the state received a

number of downgrades during that period.

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