Moody's Assigns Aa2 Rating to Michigan State University's Proposed Bonds

Strategic Insights -

Michigan State University's proposal to issue $390 million of General Revenue Bonds, Series 2025A has been assigned an Aa2 rating by Moody's Investors Service. The university's issuer rating, existing revenue bond ratings, and P-1 rating on its commercial paper program were also maintained. The university's total pro forma debt stands at approximately $2.8 billion as of June 30, 2024, with a stable outlook.

Key Takeaways:

  • The Aa2 issuer rating reflects Michigan State University's role as the State of Michigan's land grant public research university, serving over 48,600 full-time equivalent students.
  • The university's total cash and investments of nearly $5.8 billion in fiscal 2024, along with strong unrestricted monthly liquidity, provide robust financial flexibility.
  • The university's reputational strength, programmatic diversity, and positive student outcomes will continue to support steady student demand.
  • Significant operating scale and good revenue diversity, coupled with prudent financial management, provide prospects for improved operating performance.
  • However, margins remain thinner than similarly rated peers, which is a key credit challenge.
  • Detailed capital planning, disciplined use of debt, and the absence of material pension exposure will contribute to the maintenance of manageable financial leverage.
  • Other credit considerations include the ongoing exposure to governance risks, continued elevated debt to EBIDA, and highly competitive student market conditions.

Statistics:

  • $390 million: Proposed General Revenue Bonds, Series 2025A
  • Aa2: Moody's rating for the proposed bonds
  • Aa2: Moody's issuer rating for Michigan State University
  • Aa2: Moody's revenue bond ratings for existing bonds
  • P-1: Moody's rating for commercial paper program
  • $2.8 billion: Total pro forma debt as of June 30, 2024
  • $5.8 billion: Total cash and investments as of fiscal 2024
  • 330 days: Cash on hand, providing robust financial flexibility
  • 48,600: Full-time equivalent students served by the university

Sources:

  • Moody's Ratings (Moody's)
  • State of Michigan (Aa1 stable)
  • Michigan State University (MSU)
  • July 2024: Higher Education methodology published by Moody's