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June 13, 2003

Bonds rated A1

by Anne Krapfl
Dormitory revenue bonds sold by Iowa State late last month to partially pay for the renovation of Buchanan Hall have received an A1 rating from Moody's Investor Services.

The rating system judges the risk of purchasing a certain series of bonds, based on the bond issuer's (in this case, Iowa State) ability to meet principal and interest payments.

"A" is Moody's third highest among nine available rankings, surpassed only by Aaa and Aa. The "1" is a sub-level within the rank, with 1 the highest and 3 the lowest.

Iowa State issued $9.4 million in bonds on May 22 for the Buchanan renovation, which is part of the residence department's master plan.

"In spite of the hard times our economy is in, Moody's very detailed review of our finances and outlook has shown that we still are credit-worthy," said Johnny Pickett, assistant vice president for business and finance. "The strong bond rating translates to lower interest rates for us."

According to Moody's, the A1 rating on this bond series reflects:
  • Iowa State's sound position in the student market (which considers factors such as total enrollment figures, residence system capacity and number of residents, state and regional demographic trends, and effects of tuition increases).
  • The university's manageable debt load overall and adequate reserves on hand.
  • The expectation that ISU's operating budget will remain balanced -- in spite of reductions in state funding -- due to diversified revenue streams (including student tuition and fees and grants and contracts).
Moody's also confirmed its rating on another $118.7 million of previously sold ISU bonds for various building, utility and telecommunications projects.

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Published by: University Relations,
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