UNC system looks into credit score evaluation criteria

Following changes to two UNC-system schools’ credit ratings, administrators are looking into the criteria behind the ratings to avoid future downgrades.

Moody’s Investors Services recently downgraded N.C. Central University’s credit rating and shifted Western Carolina University’s outlook from “stable” to “negative” within its current rating.

Though finance administrators have said it won’t have much of an impact on students, they will be presenting the issue at the upcoming UNC-system Board of Governors meeting.

They will also meet with Moody’s in New York in the coming weeks in hopes of coming away with a better understanding of the criteria used to grade the system’s schools, said Charles Perusse, vice president for finance for the UNC system.

The division will also meet with financial administrators across the system in a more detailed session after the board meeting.

Perusse said the meeting will encourage schools to be more cognizant of the closer scrutiny of credit rating agencies.

“Their evaluations are more comprehensive in that they’re looking at more financial data,” he said.

“They’re also being stricter due to the financial situation.”

Moody’s downgraded NCCU’s credit rating from A2 to A3 last week.

Wendell Davis, vice chancellor for finance and administration at NCCU, said the downgrade could make the cost of capital more expensive.

NCCU’s current capital projects, including a new residence hall and a nursing facility, are all in good financial standing, he said.

“An A3 rating means that the cost for capital may increase — it does not mean that an institution cannot borrow money,” Davis said.

Perusse said NCCU’s credit downgrade was not influenced by its debt structure.

“There’s been no debt issued at Central since 2009,” Perusse said.

Robert Edwards, vice chancellor for administration and finance at WCU, wrote in an email it would be pure speculation to suggest why WCU avoided a credit downgrade.

But WCU could face a potential downgrade in the next 12 to 18 months, Perusse said.

Moody’s report listed continued state funding cuts and inability to meet debt payments as factors that could contribute to a potential downgrade.

“As we have in the past, we will continue to be extremely diligent in deciding when — and if — to take on additional debt,” Edwards said.

“We cannot control budget cuts, but we can control our debt.”

According to a rating methodology published from Moody’s this month, several broad factors are used in assessments of public universities, including market position, operating performance, legal security and debt structure.

Perusse said the meeting with a Moody’s representative will help administrators better understand those assessments.

“At this point, we’re in the information-gathering process, and we don’t know of anyone else who’s being evaluated among system schools,” he said.

“We wish we did.”

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