Strong credit rating leads to favorable bond sale for UAB

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Credit strength and a strong financial outlook enabled UAB to negotiate the sale of more than $172.2 million of general revenue bonds to fund new construction and refinance existing debt at long-term interest rates that are extremely low.

SEComplexConstruction is underway for the Science and Engineering Complex, one of the projects funded through the bond sale. The $76 million, 138,842-square-foot instructional facility will identify UAB as the state’s premier research university. Moody’s Investor’s Service and S&P Global Ratings recently sustained, and, in one case, elevated the already excellent credit rating for bonds issued by the Board of Trustees of the University of Alabama System on UAB’s behalf — despite an increasingly volatile financial market. As a result, UAB was able to sell bonds, at very attractive rates, to finance construction of several new facilities, including the Science and Engineering Complex, the ALTEC/ Stylslinger Genomic Medicine and Data Sciences Building that breaks ground next week and a planned Child Development Center.

“UAB likely has the highest credit rating in its 52-year history due to our growth, development and strong financial planning and management,” said Brian Burnett, senior vice president for Finance and Administration. “Our long-term debt and bonds are attractive to investors, which drives interest costs down and enables us, as good stewards, to safely and responsibly finance key institutional priorities and strategic growth.”

The rating agencies cited the university’s fiscally conservative operations, superior available resources, low debt, a diverse revenue stream supported by a large urban comprehensive public university and nationally recognized academic medical center.

Moody's Investors Service, which assigned Aa2 ratings for UAB debt, also credited “excellent financial policy and strategy [that] incorporates solid operating performance at both the academic and health care enterprises, while navigating adverse financial impacts arising from the coronavirus pandemic.”

S&P Global, which raised its rating to AA+ from AA, noted that “UAB has excellent management and governance, a firm student-enrollment trend and a robust research enterprise with solid financial performance and a light debt burden.”

The $162.7 million Series 2022-A Bonds maturing 2051 were sold to Bank of America Merrill Lynch at a true interest cost (TIC) of 2.809%. The $9.585 million refunding Series 2022-B Bonds maturing in 2024 were sold to PNC Capital Markets at a TIC of 1.216%. 

Both of these sales were conducted through a competitive bid process leading to an outstanding result for the long-term funding needs for these projects, Burnett said.