In this file photo, a crane lifts a new air handler onto the roof at Illinois State University's Wilkins Hall. The school will spend $3.5 million to address problems with leaks that allow rain water to get into students' rooms.

NORMAL — Moody's Investment Service is reviewing Illinois State University and five other schools for a possible credit rating downgrade, but university officials are confident ISU can retain its current rating.

Moody's said the review was prompted by the state's failure to enact a budget providing full operating funding to the university for the current fiscal year.

The review affects about $2.2 billion of public university debt, according to an announcement from Moody's.

Greg Alt, retiring vice president for finance and planning at ISU, said Wednesday, “We feel confident we'll hold the rating.”

Alt said Moody's reviews universities regularly but, “It's just a little more formal review this time.”

The rating affects both existing debt and future debt.

If ISU's rating is downgraded, “the cost of borrowing money is higher,” said Alt.

The university is not doing any capital projects requiring new debt, he said, and funding is already in place for the planned Bone Student Center renovation.

However, Alt said, “we're beginning work on refinancing the Cardinal Court project. We would like to proceed with that by fall.”

A downgrade would impact that but Alt emphasized, “We'd still be able to issue debt. … We're still investment grade.”

ISU has a rating of Baa1 for Auxiliary Facilities System Revenue Bonds and Baa2 for Certificates of Participation.

The auxiliary facilities bonds received a higher rating because they involve restricted funds for residential and athletics facilities, Alt explained. The certificates are covered by general revenue, which is more affected by state funding.

Among the state's public universities, only the University of Illinois has a higher rating from Moody's than ISU.

The U of I is part of the review announced Monday, as are Eastern Illinois, Southern Illinois, Northern Illinois and Governors State universities.

Northeastern Illinois University's Certificates of Participation were downgraded from Baa2 to B1 on Monday by Moody's.

The review will include budgeted fiscal 2018 operations and assumptions and an assessment of near-term debt service commitments against pledged revenues and related reserves, according to Moody's.

Some schools could see their ratings drop by more than one notch “depending on liquidity and ongoing ability to adjust to the prolonged lack of state operating funding,” Moody's said.

Alt's optimism about ISU's rating relates to its steady enrollment and contingency plans the university has developed “even if state funding is delayed or reduced,” he said.

“We're able to demonstrate how we're managing the situation,” said Alt.

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Follow Lenore Sobota on Twitter: @pg_sobota


Education Reporter

Education Reporter for The Pantagraph.

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