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Release: Immediate

Moody's upgrades UI rating for utility system revenue bonds

IOWA CITY, Iowa -- Moody's Investor Service, an independent bond rating agency based on New York's Wall Street, has assigned a Aa3 rating with a stable outlook to the University of Iowa's Utility System Revenue Bonds, Series 1998. The Aa3 rating represents an upgrade from the A1 rating assigned to previously issued utility bonds.

The announcement came this week just prior to the sale of $15.5 million in utility system revenue bonds. The proceeds from the sale of those bonds will fund three projects: an expansion of the north campus chilled water plant; a northwest campus chilled water plant, which will be located in the Newton Road parking facility that is currently under construction; and a portion of the utility work for the new Medical Education and Biomedical Research Facility.

"This is very positive news for the University of Iowa and the state," said UI President Mary Sue Coleman. "I am very pleased that a Wall Street agency has recognized that we are a strong and high quality university. This rating upgrade was based on a very extensive review of the Univerity, so this is a significant result."

Over time, the new bond rating has the capability of reducing the cost of borrowing for the University, said Douglas K. True, UI vice president and treasurer. In addition, the higher rating improves the already high value of University of Iowa Regents bonds held by Iowans, he added.

According to Moody's, the upgrade in the bond rating was based on several factors, including:
*The UI's status as "Iowa's flagship public research university." Even through the UI is among the smallest of the nation's public research universities, it ranks 21st in gaining federal funding for research, the company noted.
* Increasing freshman enrollment and solid non-resident student demand. The UI's ability to attract out-of-state students "provides good support in the event of a downturn in Iowa's economy," Moody's said.
*The University has a manageable debt position relative to its growing resources.

The essential nature of the utility projects being financed was also cited as a reason for the upgrade in the bond rating.

The investment service's analysts concluded by noting that "Moody's stable outlook for the University's rating incorporates our expectations of stable to slightly growing enrollment; modest additional debt; continued growth in financial resources driven by the University's successful fundraising; and balanced operations."