S&P raises UAB bond ratings on very strong financial and enterprise profiles

Identifying a stable outlook and UAB’s very strong enterprise and financial profile, S&P Global Ratings has raised its rating on various series of general revenue bonds issued by The University of Alabama System Board of Trustees on behalf of UAB.

ray watts 2016President Ray Watts, M.D.S&P Global Ratings has raised its rating from AA- to AA on various series of general revenue bonds issued by The University of Alabama System Board of Trustees on behalf of The University of Alabama at Birmingham.

“The upgrade reflects our view of UAB’s very strong enterprise and financial profile leading to an initial indicative and final stand-alone credit profile rating of AA and bond issue rating of AA,” said S&P Global Ratings analyst Ken Rodgers. The S&P report, issued May 17, cites UAB’s sound governance and management as well as its very strong enterprise profile.

“S&P has a rigorous and thorough assessment process, and we appreciated the opportunity to demonstrate UAB’s financial status and strategy to S&P’s analysts,” UAB Vice President Allen Bolton said Wednesday. “A ratings upgrade in this environment is a very positive validation and another proof point of our great institution’s positive momentum.”

UAB President Ray L. Watts says the raise to AA is another major step forward on the university’s upward trajectory.

“Our leadership team, especially in Financial Affairs, has worked diligently to enhance UAB’s financial position and establish a strong financial pathway that will support our institution’s ambitious goals across each pillar of our mission — education, research, patient care, community service and economic development,” Watts said. “This positive outcome is a reflection of the hard work and dedication by our faculty, staff, students and supporters throughout our UAB community.”

allen bolton v 2016Allen BoltonMany factors contributed to the raise in UAB’s rating. The following excerpt of S&P’s news release describes the justification of the change:

  • UAB’s very strong enterprise profile is characterized by its role as one of the state’s major comprehensive research universities with a focus on health sciences and engineering. UAB’s generally stable, though occasionally cyclical, enrollment and favorable student quality and retention also shape our view of its enterprise profile. UAB is part of the University of Alabama System. Oversight from the System combined with UAB’s generally stable management team leads us to conclude the university has healthy governance and management.
  • UAB’s very strong enterprise profile also reflects robust economic fundamentals associated with Alabama — a state that has maintained S&P Global Ratings’ second-highest rating for over 40 years. UAB’s very strong financial profile reflects our view of its sound financial management policies and financial performance with recurring positive operating margins recorded on a full accrual basis, ample available resources and a low debt burden.
  • The stable outlook reflects our belief that UAB will experience enrollment and patient utilization growth over the next two years, in addition to continued very strong financial performance. We also expect governance and management to remain sound. UAB’s financial resources are anticipated to strengthen further, thereby offsetting some of the risks associated with health care operations and research funding levels.
  • We could raise the rating on UAB if enrollment increases dramatically, financial performance remains very strong, financial resource ratios strengthen significantly relative to annual operating expenses, or if debt burden remains low.

Related criteria and research

Related criteria

  • USPF Criteria: Contingent Liquidity Risks, March 5, 2012
  • General Criteria: Methodology: Not-For-Profit Public And Private Colleges And Universities, Jan. 6, 2016
  • USPF Criteria: Assigning Issue Credit Ratings Of Operating Entities, May 20, 2015
  • Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009

Related research

Alternative Financing: Disclosure Is Critical To Credit Analysis In Public Finance, Feb. 18, 2014

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com.

All ratings affected by this rating action can be found on the S&P Global Ratings public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

S&P Contacts

Primary Credit Analyst: Ken Rodgers, New York 212-438-2087; ken.rodgers@spglobal.com

Secondary Contact: Stephanie Wang, New York 212-438-3841; stephanie.wang@spglobal.com