University of Chicago Is Outlier With Growing Debt Load

Michael McDonald and Brian Chappatta:

The University of Chicago has been trying to stand out from its elite rivals and is doing so in one category: amassing debt. That’s put its credit rating at risk.

The university founded by oil magnate John D. Rockefeller in 1890 is in the midst of a $1.7 billion development plan. As municipal interest rates remain close to generational lows, it may borrow as much as $900 million in the next four years, according to Standard & Poor’s. The plan prompted S&P and Moody’s Investors Service to cut the school’s credit outlook to negative. Chicago already has $3.6 billion of debt — the most relative to its endowment among the richest U.S. schools.

“When you look at the University of Chicago, they are an outlier — they are highly leveraged,” said Diane Viacava, an analyst at Moody’s in New York. “They need very strong cash flow to be able to provide the pledged revenue to pay for the debt service.”