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It is known that sometimes a university will have two bond ratings that
do not "match"…in other words a higher rating from one rating agency for
the same bond issue than the another rating agency.
George K. Baum & Company has completed research frequency of split
ratings between the two principal credit rating agencies (Moody's
Investors Service and Standard and Poor's) for both public and private
universities and colleges.
Private Colleges and Universities
The most striking results were discovered for the rating of private higher
educational institutions. Of all the private colleges and universities
with dual rating (111 schools), a significant 35 percent of the ratings, 39,
were split. The data shows S&P tended to rate higher than Moody's by one
notch in both the AA and A rating category, on average, about 70 percent
of the time, when there is a split rating.
Now the question is: why do these private college ratings differ? Both
rating agencies declined comment when asked. It appears that it is the
result of differing rating paradigms or methodologies. Each agency emphasizes
different factors in determining its rating assessment. To precisely
answer the question as to why this trend appears will require individual
analysis of each split rating.
Public Colleges and Universities
It appears that split ratings are also prevalent for public institutions. Of the
145 schools with dual bond ratings 47%, 68 ratings, were split between the two
agencies. In some cases Moody's had the higher rating and in some cases S&P
assigned the higher rating. No trend was discernable for public college or
university ratings.
Click on the link below for the detailed list and results of both the
public and private university split ratings research prepared by George
K. Baum & Company as of September 27, 2006.
For further information call Lee White, Executive Vice President,
303-391-5498, whiteml@gkbaum.com, or Trinity Ludwig, Analyst,
303-391-5414, ludwig@gkbuam.com.
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