Rating College Debt: A Case Study of Union College

On Friday, March 3rd , President Stephen Ainlay made an announcement of “the largest, most expensive, most complex project in Union’s history.” President Ainlay is referencing the renovation one of Union’s central academic buildings, Science and Engineering. The three-phrase building project will take an estimated three years and cost a total of $100 million. About $50 million of this project will be financed through debt. This comes at a time when, Moody’s, a top rating agency changed the methodology for rating higher education debt. My thesis explores the impact of the new methodology on Union’s debt rating. While the elimination of some criteria like matriculation and selectivity may help Union’s rating, the addition of other criteria like total wealth may have a negatively impact. I find that even after including $50 million of new debt Union should retain its A1 rating. To strengthen Union’s case for an A1 rating I conduct a peer comparison to help Union navigate Moody’s new rating methodology. I also explore potential ways to structure the additional debt and discuss the pros and cons of each option.