UH medical center a step closer
By Beverly Creamer
Advertiser Education Writer
The first phase of the University of Hawai'i Health and Wellness Center took another step forward yesterday as three of the country's top bond raters issued "solid" ratings for UH bonds.
"This is the first time in recent years that there has been independent scrutiny of the strength of the university's finances," said J.R.W. "Wick" Sloane, chief financial officer for the university. "We're not rich, but it looks fine."
Under new powers of autonomy granted by a constitutional amendment in 2000, the university is raising its own money to build Phase 1 of the new medical school complex in Kaka'ako. In order to generate the $150 million needed, UH first had to get a bond rating. The better the bond rating, the less interest the university will have to pay on the bonds.
Fitch, Standard & Poor's and Moody's each gave a mid-level rating to UH bonds, which will be issued to pay for Phase 1 of the new medical school, which expects to break ground in October.
Fitch rated the bonds A+, S & P rated them A+ and Moody rated them Aa3.
"A+ is a very solid rating," said Frank Lauterbur, managing director of UBS PaineWebber from his Los Angeles office. UBS PaineWeb-
ber is the lead underwriter for the bond issue, which will be offered in the next month.
"It's what we all expected would be the outcome. All are a notch below the state, which is typical for state universities," said Lauterbur. "The university did a great job in demonstrating the comprehensive program it has for the whole state. The community colleges, as well as the top programs at Manoa, really stood out."
In making its rating, Fitch cited efforts by the university to diversify its financial base by broadening sources of external support, specifically noting work by President Evan Dobelle and others to boost fund-raising and enhance the university's profile.
Fitch noted that the projected debt burden after this bond issuance will be "moderate" for a public university. It also noted that state investment in the system had increased recently (in the just-finished Legislature) which contributed to excellent operating margins.
The major credit risk, Fitch pointed out, was the university's continuing dependence on state appropriations. Especially in the wake of Sept. 11, Hawai'i's tourism-dependent economy could mean slower growth for UH over the next several years, it pointed out. It also noted that the recent threat to the medical school accreditation is a situation that could stall plans to expand research, and is something Fitch will continue to monitor.
Both S&P and Moody's assessments reflected similar sentiments, with Moody's noting that these bonds in particular have been rated one level higher than the university's general credit rating because they are secured by money from the tobacco settlement.
Moody, in particular, noted the strength of UH as the state's sole public provider of higher education, and a new commitment to reach out even further to the in-state market as well as the West Coast of the Mainland and Asia, with a special focus on Japan.
Reach Beverly Creamer at bcreamer@honoluluadvertiser.com or 525-8013.
