The University of Cambridge has been awarded a stable AAA credit rating, making it a safer investment than the British government, according to ratings agency Moody's.
The move indicates that Cambridge may be willing to issue debt for the first time in its history, after being authorised to borrow up to £350m in order to invest in research facilities and accommodation. "Right now, we're exploring our options and we have several open to us," Andrew Reid, the university's Director of Finance, said. "There's no urgency." The Cambridge University Endowment Fund can draw on a long-term rate of about 4.5 percent a year, he added.
Credit ratings assess a debtor's ability to pay back their debt and the likelihood of default. Moody's AAA rating is the highest level of confidence it can award.
Cambridge's strong finances stand in stark contrast to the rest of the country. Last Friday, another ratings agency, Fitch, joined Moody's in placing UK sovereign debt on negative watch after the economy's sclerotic performance over the last year during which it slipped back into recession.
Cambridge is the richest university in the United Kingdom, with recent estimates placing the total value of its assets at over £4bn. Much of this can be attributed to Cambridge's 800th anniversary in which £1.2bn was raised, making it the most successful fund-raising campaign ever completed by a European university. Barring Oxford (£3.4bn in assets), and Edinburgh (£200m), Cambridge is worth double the combined £2 billion assets of Britain's other universities.
Investment managers would be attracted to a Cambridge bond sale, said Christopher Bullock, an analyst at Henderson Global Investors Ltd. in London which manages about $23 billion. "If it has the right guarantee and security then it will tick boxes… there's significant investor demand for high-rated corporate securities that offer a premium over sovereign and agency paper."
In addition to the University's strong balance sheet, Moody's also praised the strong governance of the University. "The university's governance and management is sophisticated with clear processes and approvals for any major decisions and a high degree of transparency, given the publication of all major matters and proposals in the university's weekly published Cambridge Reporter," Moody's said.
Ben Richardson - News Editor