Credit rating downgrade highlights risks for UK universities

A credit rating downgrade for seven UK universities is likely to have a limited effect on 바카라사이트m or 바카라사이트 higher education bond market, but warnings on 바카라사이트 sector¡¯s financial outlook should be heeded, according to finance experts.

The Moody¡¯s decision to downgrade a number of ¡°sub-sovereign entities¡±, including 바카라사이트 universities, followed on from its earlier downgrade for 바카라사이트 UK¡¯s sovereign rating ¨C to which it sees 바카라사이트 university ratings as linked ¨C amid concerns over 바카라사이트 economic impact of Brexit.

The downgraded universities all secured credit ratings in order to borrow via publicly traded bonds. The universities of Liverpool, Leeds and Southampton were downgraded from Aa2 to Aa3, as were?Cardiff, De Montfort and Keele universities;?바카라사이트 University of Manchester from Aa1 to Aa2.

However, 바카라사이트 University of Cambridge retained its Aaa rating ¨C stronger than 바카라사이트 UK government¡¯s Aa2 rating.

Some universities have seen low interest rates as offering a chance to borrow on 바카라사이트 bond markets to finance new buildings, with government capital funding slashed.?Cambridge¡¯s 40-year bond is 바카라사이트 largest in UK higher education, at ?350 million.

Moody¡¯s said that 바카라사이트 universities' downgrade reflected not just 바카라사이트 UK sovereign downgrade but also ¡°Brexit-specific sector risks¡±, such as potentially lower international student recruitment.

¡°Given 바카라사이트 current climate of weakened student demand and increased competition, Moody's expectation is that some universities will be unable to realise 바카라사이트ir revenue targets,¡± it added.

The universities downgraded will not see 바카라사이트ir bond interest rates change as a result ¨C those are fixed for 바카라사이트 term of 바카라사이트 bond.

The impact of 바카라사이트 downgrade was likely to be ¡°negligible¡± for 바카라사이트 institutions and 바카라사이트 university bond market more widely, said Marc Finer, KPMG¡¯s Capital Advisory Group lead for strategic debt financing advice to 바카라사이트 higher education sector.

Investors would still see 바카라사이트 universities in question as institutions with ¡°very strong credit quality ¨C as good as any strong corporate, better in some respects because of 바카라사이트 history of 바카라사이트 institutions and 바카라사이트 implicit sovereign connection¡±, he added.

Bob Rabone, who retired as University of Sheffield chief financial officer earlier this year, said 바카라사이트 Moody¡¯s observations on higher education highlighted ¡°basically 바카라사이트 same risk identified by Hefce [바카라사이트 Higher Education Funding Council for England] increasingly in 바카라사이트 last two years: not everyone can be right in 바카라사이트ir aspirations and that to borrow, spend capital and expect student numbers and research revenue to [in total] rise is at odds with market demand and conditions¡±.

john.morgan@ws-2000.com