Moody's downgrades UT's bond rating in light of financial struggles
There are more financial issues for the University of Toledo as one of the nation's major bond agencies has downgraded the school and listed UT as having a negative financial outlook.
This is just the latest report of money problems the school is having.
The University of Toledo Medical Center is in the red with losses of nearly $15 million dollars through February. The school is also looking at layoffs and furloughs amid the COVID-19 pandemic, in part coming from major cuts in state aid to the tune of $4 million.
Right now, it's a difficult time for any college or university, not just UT. They're not sure what this upcoming school year will look like and what it could mean financially.
UT does plan to hold in person classes this fall.
As UT students, faculty and staff deal with a global pandemic, there are some enormous financial issues on the horizon. The school already projects a deficit for this fiscal year of $21 million and for fiscal year 2021 the deficit is projected at $36 million.
Tuesday, Moody's downgraded the university's rating to A2, which is the described as the middle of the scale. With the effects of COVID-19, Moody's also put the school's financial outlook at negative with the report saying that outlook reflects "very weak financial operation through at least fiscal 2021."
This rating affects the school's ability to bond out a project or borrow money. It judges the risk investors could incur and could affect an interest rate.
Moody's does say the outlook could improve. They include financial ways like sustained improvement in operating cash flow, enhancement of strategic positioning and then the major issue the school is dealing with UTMC.
Moody's says improvement in operations of execution of separation could help. The school is currently looking for proposals to either sell the hospital or find a partner.
Moody's says the rating could go down for a number of reasons. One included the inability to affect separation from UTMC while retaining associated research and academic programming.
Of the 10 Ohio public universities Moody's rates only 2 others have negative outlooks, Shawnee State and Wright State.
Bond Rating for all Ohio Pubic University’s that Moody’s rates:
• Kent State University Aa3/stable
• Northeast Ohio Medical University Baa2/stable
• Ohio State University Aa1/stable
• Ohio University Aa3/stable
• Shawnee State University Baa3/negative
• University of Akron A1/stable
• University of Cincinnati A1/stable
• University of Toledo A2/negative
• Wright State University Baa2/negative
• Youngstown State University A2/stable
The full statement from the University of Toledo is below:
The financial outlook for The University of Toledo is aligned with a negative forecast for both higher education and healthcare industries in this time of uncertainty. As a public institution, we are dependent on tuition revenue, state funding and hospital revenue, which continue to face competitive challenges exacerbated by the operational disruption as a result of the COVID-19 pandemic.
UToledo has been open and transparent about the financial challenges facing the institution. University leadership has taken preliminary, immediate cost saving measures to address a budget deficit of at least $20 million for this fiscal year. The University is planning multiple budget scenarios for the upcoming fiscal year with a projected $36 million deficit, maintaining our strategic focus on research, teaching and learning. As previously shared, given the fiscal realities UTMC is facing, the University has determined that it cannot continue to operate the hospital in its current state, depleting resources from the University and our primary academic mission. The public request for proposal (RFP) process is underway for a potential acquisition, lease, management agreement or other transaction of the community hospital with a deadline of June 10.
Full statement from Chancellor Randy Gardner, from the Ohio Department of Higher Education on this bond rating:
“Moody’s has identified the coronavirus crisis as a key factor in its financial rating of the university. Like most colleges, the University of Toledo faces significant challenges at this time, but we know that a strong Toledo is important to Ohio and especially to Northwest Ohio’s future. We'll continue to engage with the university to ensure that it remains a vital part of the region and the state.”