Agency changes rating on GW bonds

GW will have to pay a higher interest rate on its upcoming bond offering after a bond-rating agency raised concerns over the financial security of the University.

But because of insurance GW will purchase, the effects of the downgrade will be limited, said Catherine Lynch, associate vice president for Treasury Management.

Lynch said the University hopes to complete the transaction Monday. The bond offering will add more than $200 million in debt for GW.

According to a report by the bond-rating agency Moody’s, GW’s bond rating was downgraded to an A2 rating from an A1 rating as a result of the University’s increase in debt. Moody’s also continued a negative outlook on the bonds because of ongoing operating pressure at the University’s medical center.

Lynch said GW will save money from garnering tax-exempt status for the bonds from the District in addition to savings from the insurance purchase.

According to Moody’s, GW Medical Center’s operations lost $39 million in the last fiscal year. Lynch said the medical center’s operations include the School of Medicine and Health Sciences, the School of Public Health and Health Services, Medical Faculty Associates, which provides outpatient services, and the GW Health Plan.

These losses are primarily driven by the medical center’s patient care activities delivered through its faculty practice plan and its health maintenance organization, according to the report.

The report noted that GW is attempting to reduce its losses at the medical center by reducing some of its faculty and closing many of its clinics. Lynch said GW is working to improve the operations of the medical center. GW’s Vice President for Medical Affairs John Williams was unavailable for comment.

GW has financial resources levels which provide a good cushion for its operations, according to the Moody’s report. The report noted GW’s strong position in higher education, with popular undergraduate programs and established graduate programs.

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