Credit ratings agency Standard & Poor’s affirmed Tuesday the “BBB-” rating of the University of Puerto Rico bonds, Series P, Q and O, giving them a stable outlook.
The report “highlights the UPR’s commendable work stabilizing the university system’s finances during the last two years,” Government Development Bank President Juan Carlos Batlle and UPR President Miguel Muñoz said in a joint statement.
Among other things, S&P pointed out that the UPR’s administration had reported the deficit would run through 2013, but was able to overcome it in two years.
In its progress report to the stateside agency, the UPR’s administration attributed the change to measures implemented to reduce operating expenses, increased tuition revenues, and to the GDB, which, through an agreement, provided support in stabilizing the school’s credit.
“We believe that by affirming the classification of the UPR bonds and stable outlook, S&P is recognizing the work we’ve done at the UPR, with the GDB’s support. We are committed to maintaining the fiscal prudence that has characterized us since 2009 to guarantee and safeguard compliance with the mission of our first educational institution, the principal motor of Puerto Rico’s economic development,” Muñoz said.
The S&P report highlights, among other things, that in 2011 the Middle States Commission on Higher Education affirmed the UPR’s accreditation, after putting 10 out of 11 units on probation. The probation was declared as a result of the interruption of operations in these units for 62 days due to student protests in 2010 over education cost increases.
S&P points out that the outlook on UPR bonds is stable because it is projected that during the next two years the student demand for the UPR will remain stable and the institution will continue carrying out the present fiscal stabilization plan, thus improving its net assets.
“Through this rating action, S&P confirms that the work of the UPR team, with the support of the GDB, is going in the right direction,” Batlle said. “Both teams have joined to seek efficiencies, cut down expenses and restore the fiscal health of the university system. It is extremely important to continue with the work plan and maintain stability in the UPR finances for the benefit of future generations of professionals of our island.”
In terms of the “BBB-” classification, the report explains that given the UPR’s high dependency on revenues on the Government of Puerto Rico, which account for 60 percent of its income, the one notch difference between the central government rating and the UPR rating is considered appropriate.
At the same time, S&P noted it would continue monitoring the positive results of the UPR’s fiscal stabilization plan on a longer term basis.