U of L Foundation receives negative debt rating

By on May 27, 2016
Grawemeyer Hall U of L

By Kyeland Jackson —

Moody’s, a debt rating service, has changed the U of L Foundation’s rating from “stable” to “negative,” according to a statement released by the group May 23 and a report by the Courier-Journal.

The rating makes borrowing money more difficult for the foundation, and was given due to declining financial reserves and needs of the university.

“A combination of the use of cash for strategic investments, weak investment returns and continued investment in real estate ventures have caused the foundation’s financial resource growth to lag peers,” the report said.

U of L finance professor David Dubofsky says the rating will not have a large impact.
“Moving from ‘stable’ to ‘negative’ will have a very small impact on U of L’s Foundation,” Dubofsky said. “It is true that a higher interest rate paid to lenders means there is less money available for students and for the activities funded by the U of L Foundation, but the impact will be negligible.”

The ULF-managed endowment lost $146 million in the last six months. ULF said in their March 7 meeting that $80 million was spent on university needs, while the remaining $66 million was lost to bad market investments. A month before the meeting, a motion was considered by U of L’s Board of Trustees to remove President James Ramsey from his position on the U of L Foundation board. The motion did not go forward.

The foundation’s next meeting is scheduled for June 23. While Dubofsky said the current rating is negligible, the promise of higher interest rates with more bad ratings would hurt the foundation and university.

“The new ‘negative’ outlook is like a warning that this may happen in the next year or two,” Dubofsky said.

About Kyeland Jackson

Editor-in-Chief at The Louisville Cardinal.

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