S&P: State University of Iowa's Series S. U.I. 2018 Athletic Facilities Revenue Bonds Assigned 'AA-' Rating

S&P Global Ratings assigned its 'AA-' long-term rating to the Iowa Board of Regents' (BOR) $33 million series S. U.I. 2018 athletic facilities revenue bonds, issued for the State University of Iowa (SUI, or University of Iowa). In addition, we affirmed our 'AA-' long-term rating on SUI's outstanding athletic facility bonds, dormitory bonds, and parking system revenue bonds. Lastly, we affirmed our 'AA' long-term rating and SPUR on SUI's outstanding academic building revenue bonds, memorial union bonds, and telecommunications facilities revenue bonds and the University of Iowa Facilities Corp.'s lease revenue bonds. The outlook on all ratings is stable.

The university will use the net proceeds from the series 2018 athletic facilities revenue bonds to pay a portion of the costs of improving, expanding, and remodeling Kinnick Stadium, the university's intercollegiate football stadium.

We differentiate the 'AA-' rating on the athletic facility, dormitory, and parking system bonds from the university's unlimited student fee (USF) debt ratings of 'AA' due to the more limited revenue streams securing those bonds.

"The ratings reflect our view of the university's very strong enterprise profile and very strong financial profile," said S&P Global Ratings credit analyst Mary Ellen Wriedt.

We have assessed the university's enterprise profile as very strong, reflecting its solid enrollment and demand profile, with good retention rates and improving graduation rates. We have assessed the university's financial profile as very strong, with operating surpluses, available resource ratios relative to both debt and operations that remain fairly consistent, and pro forma maximum annual debt service that we consider moderate. This is partially counterbalanced by additional planned debt issuances in the next two years. Combined, the enterprise profile and the financial profile lead to an indicative standalone credit rating for the university's USF rating of 'aa' and a final long-term rating of 'AA'.

The stable outlook reflects our expectation of continued stable enrollment, strong overall university financial performance, and solid hospital financial operations. We expect any additional debt issuances to be commensurate with the maintenance of available resource ratios that are consistent with the rating category. The outlook on the athletic facility, housing system, and parking system ratings reflects our expectation of continued adequate debt service coverage (DSC).

We do not expect to raise the USF ratings during the two-year outlook period, but we would view growth in available resource ratios, as well as improvement in certain enterprise profile characteristics, favorably.

While we consider it unlikely, credit factors that could lead us to lower the USF ratings include deteriorating enrollment, recurring state funding cuts that may materially weaken financial performance leading to operating deficits, or an erosion of available resources relative to the rating category due to the issuance of a significant amount of debt that exceeds what the university has indicated to S&P Global Ratings. In our view, it is unlikely that we would lower the ratings on the system bonds due to their historically strong DSC and continued strong demand. However, the ratings could be pressured if coverage weakens significantly due to increased debt or lower system revenues.
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