UPDATE: 2 October 2012, to incorporate the latest ratings.
It’s official. Well, sort of. I’ve collected up the credit ratings that exist for the higher education sector, and all of those British universities (or university colleges) which have been rated are either prime or high-grade. (Italy, meanwhile, is not an Ivy League debt repayer.)
|University of Cambridge||Aaa||Stable||Moody's|
|St Peter's College, Oxford||AAA||Negative||Fitch|
|Lincoln College, Oxford||AAA||Negative||Fitch|
|Somerville College, Oxford||AAA||Negative||Fitch|
|De Montfort University||Aa1||Negative||Moody's|
|Kings College, London||AA||Stable||S&P|
|Nottingham, University of||AA-||Stable||S&P|
|Sheffield, University of||AA-||Stable||S&P|
The agencies are quite sanguine about the sector – despite the far-reaching nature of the government’s reforms. A note from Moody’s, issued yesterday, said the higher education reforms were “credit neutral” for most universities. The note roughly agreed with my recent assessment.
The higher ranked schools and most schools opting to be low-cost providers, should fill their positions without great difficulty. Mid-ranked schools poorly prepared to defend their share in the highest-achieving applicants could be at risk despite having had ample time to prepare for the current reforms.
They also note another risk:
Finally, the lowest ranked schools if facing governance difficulties may struggle to fill their places in the face of what are, in all cases, higher fees.
One thing worth noting is they also think the regulator is effective (as does the sector):
We anticipate that the regulator, the Higher Education Funding Council for England (Hefce) will monitor and assist in the management of any struggling institution over the next two years, such that structural balance can be regained or assets and liabilities transferred as necessary.
One thing the note does not discuss is that the sector has extremely strong balance sheets. A few institutions are in a weak position, but English universities had £25bn of net assets (excluding pension liabilities) in 2009-10.
UK higher education is a good credit risk.