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The Daily Tar Heel

UNC awarded AAA top bond rating, indicating high credit quality and financial strength

The Old Well is pictured on Oct. 17, 2021

UNC was awarded the top bonding rating by three agencies in May, making it the only school in North Carolina to earn a unanimous AAA rating. This rating evaluates the University's financial security and credit quality. 

AAA is the highest rating a school can receive, which will help UNC issue bonds to finance things the school needs. Additionally, when borrowing funds the University will have a lower interest rate. 

The agencies that rated UNC are Standard & Poor’s, Moody’s Investors Service and Fitch Ratings. All three agencies attributed their score to the University's financial strength and ability to manage the budget during COVID-19. 

“That's important because it indicates that the University is rated as the highest quality borrower. We have such a good track record in repaying the money that we've borrowed, that we are qualified for the lowest interest rate," economics professor Patrick Conway said. 

Nathan Knuffman, vice chancellor for finance and operations, presented his first projected balanced all-funds budget to the UNC System Board of Governors prior to the rating. 

Some important parts of his budget included offsetting $200 million in lost revenue from COVID-19 and removing a $100 million structural deficit. 

Knuffman is getting rid of the deficit by creating a model that takes into account all the University's revenue sources and expenditures as well as trimming personal funds. 

Conway says there are three main reason why UNC gets a AAA rating. 

The first reason is that by being a member of the UNC system, the University is supported by the state of North Carolina. 

The state government has an AAA rating in its borrowing, which demonstrates a fiscal responsibility that other states have not.

Conway said the second reason is that the UNC system has only borrowed outside of the state government a few times with individuals who will then purchase bonds UNC has issued. Those bonds were then repaid on time. Rating agencies look upon the ability to repay debt on time positively.

According to Conway, the third reason is that UNC does not plan to borrow from capital markets other than retiring existing bonds and issuing new bonds of the same value. 

Mustafa Gültekin is a professor at UNC in the finance department. 

Universities issue bonds to finance the school through maintenance, projects around campus, facilities updates and more.

“Chapel Hill financially is in a very good position to be able to invest in this growth and other things along that line," Gültekin said. "When I say growth, we need physical facilities, we need good students. And make sure that we have scholarships, as well as to retain the faculty all along. Everything really boils down to money." 

Chancellor Kevin Guskiewicz said the achievement of this rating is a testament to the hard work of University deans and unit leaders, especially Nate Knuffman and his team in Finance and Operations. Guskiewicz also said the consultation of the Board of Trustees was also important in establishing a balanced budget.

"The unanimous vote of confidence from the top ratings agencies is further proof that the University is on firm financial footing," Guskiewicz said. "We will continue to invest in the future of this University and our mission of teaching, research and service with confidence."

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