ANN ARBOR—Citing the University’s sustained ability to control costs and build revenues, Moody’s Investors Service has upgraded ratings for the University of Michigan’s bonds from Aa1 to Aaa, the highest rating possible. The upgrade applies to $166 million in student fees, housing and parking bonds.

Moody’s also upgraded the University of Michigan Health System‘s medical service plan bonds from Aa2 to Aa1. The U-M Hospitals’ revenue bond rating remains unchanged at Aa2.

Moody’s bond rating is an indicator of confidence in the University’s future worth for investors.

“Moody’s expects the University’s large financial resource base to continue to provide an excellent cushion for the operating budget and for debt,” the report noted. “The primary engines of financial growth-investment return, new gifts and a disciplined budgeting process, with appropriate expense controls, should support strong growth over the long run.”

The report cited the University’s superior financial resources, strong market position, excellent operating results derived for a well-diversified revenue base, significant but manageable plans for additional borrowing and a “stable outlook on healthcare operations despite stress in operating environment” as the basis for its upgraded rating in the bond market.

“This is a clear indicator that our financial management throughout the University is excellent,” said Robert Kasdin, the University’s executive vice president and chief financial officer. “This is a vote of confidence from a very well-respected outside source.”

The investment advisers noted that they expect the University will “remain one of the nation’s leading and highly regarded educational and research institutions, with a powerful market draw not only in Michigan but throughout the country.” They also pointed to the U-M’s strength in federally funded research and acknowledged its leadership as “the nation’s leading public university in dollar volume of research contracts.”

Moody’s also predicted a stable outlook for the U-M based on its expectation that the University “will continue to rank among the very top of the nation’s public universities in its financial resource base, student demand and operating performance.”

“The outlook also reflects our belief that future borrowing will be manageable, and that performance of healthcare operations will not deteriorate despite the ongoing challenges facing all academic medical centers,” Moody’s reported.

Moody’s began rating bonds in 1909 as part of its analysis of railroad investments and introduced the rating symbols that have now become a world standard. It is one of the world’s foremost observers of the business and financial markets.

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