Moody's takes "negative" outlook on U of L Foundation debt - WDRB 41 Louisville News

Moody's takes "negative" outlook on U of L Foundation debt

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Students at the University of Louisville Students at the University of Louisville

LOUISVILLE, Ky. (WDRB) --  Moody’s Investors Service has lowered its position on the University of Louisville Foundation’s bonds, citing recent investment losses that have reduced the foundation’s endowment, operational risks and the university’s increased need for funding support given continued state budget cuts.

In the action dated Monday, the rating agency did not change the foundation’s Aa3 rating, an investment-grade rank that signals high quality debt with very low risk of default.

But the agency revised its outlook of the foundation from “stable” to “negative.”

Jason Tomlinson, the foundation’s chief financial officer, said the revision was not unexpected and will not affect the foundation’s cost of borrowing.

"The overall rating is still a very high rating," he said, adding that the foundation also has a good mark from Moody's counterpart Standard & Poors. "It doesn't impact us at all."

Moody’s said the foundation’s direct and guaranteed debt of about $200 million is increasing faster than its financial reserves, which are still sizable with $768 million on hand at the end of 2015.

The university’s endowment, which the foundation manages, has taken a beating in the financial markets recently, falling from $782 million at June 30, 2015 to $646 million in as of Jan. 31, 2016, according to the latest report from Cambridge Associates, the foundation’s investment manager.

Moody's said the foundation still has a "sound" cushion of financial resources relative to its operating expenses, but that cushion is "substantially weaker" than four years ago because of the foundation's use of cash, poor investment returns and "continued investment in real estate ventures."

Tomlinson said the foundation's debt ratio has already improved since the report's year-end timeframe with the paying off of a dorm the foundation financed, and debt from the foundation's purchase of the former Kentucky Trailer property -- where it plans an engineering research park -- will be refinanced soon.

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