July 1, 2022

S&P Global Ratings upgrades its outlook on UOW finances

Agency says cost savings of the past two years will allow University to manage aftershocks of pandemic-related revenue losses

S&P Global Ratings has upgraded its outlook on the University of Wollongong (UOW) to a stable outlook from a negative outlook, while also affirming the University’s AA/A-1+ issuer credit ratings.

The University had maintained an AA/A-1 stable outlook credit rating since 2006; however as a result of the COVID-19 pandemic and the reduction in international student income, the rating was placed on negative watch in June 2020.

The upgraded outlook in the international ratings agency’s 30 June 2022 report vindicates UOW’s approach to addressing the challenges of the COVID-19 pandemic.

The University’s aim throughout the pandemic has been to preserve its long-term financial sustainability, reduce costs while minimising job losses, and safeguard the world-class quality of its teaching and research.

The upgraded outlook from S&P shows that UOW is on a firm path to financial sustainability, while the recent QS World University Rankings 2023, which saw UOW rise eight places to rank 185th globally (placing it in the top 1 per cent of universities worldwide) and the QILT Employer Satisfaction Survey, which rated UOW graduates as the best employees in Australia, show this hasn’t come at the expense of the University’s teaching and research quality.

“We achieved these accomplishments thanks to an extraordinary effort by UOW staff who transitioned to online teaching over a concise time frame, and who agreed to temporarily vary their employment conditions to minimise job losses as the institution confronted the financial impact of COVID-19,” UOW Vice-Chancellor Professor Patricia M. Davidson said.

“Significant challenges remain but I am confident in the University’s ability to pull together and overcome them while continuing to serve the communities in which we operate and maintaining our well-earned reputation as a world-class teaching and research institution.”

In its recent annual report, UOW reported a modest surplus of $8.3 million for 2021.

S&P’s outlook revision reflects its view that pandemic-related risks to UOW’s finances and operations are diminishing. UOW entered the pandemic with a solid market position, a high level of available resources, and relatively low debt-servicing needs.

S&P noted the improved stable outlook reflects its view that cost savings achieved over the past two years will allow UOW to manage the aftershocks of pandemic-related revenue losses, while its debt will stabilise and then decline over the medium term.

In its overview, S&P said: “We expect UOW to run a roughly balanced operating budget, on average, during the next few years, after small adjusted operating deficits over the last two years. Revenues should gradually recover as onshore, and offshore international students return to campus.

“UOW's debt burden and debt servicing needs are high compared to peers, but we anticipate debt will remain stable before declining from 2024 onward as the first of its bullet maturities is repaid.

“Our ratings on UOW benefit from uplift due to its important public policy role and strong links to the Australian government.

“We are revising our outlook on UOW to stable from negative and affirming our AA/A-1+ issuer credit ratings.”