Minutes of a Regular Meeting, June 22-23, 2004 - Digital Collections

REGENTS’ POLICY MANUALSECTION 4—FINANCE AND MANAGEMENTBond rating agencies help to maintain the confidence of the public and purchasers of debtregarding the ability of an issuer to service and repay bonds, loans, and/or notes. TheUniversity recognizes its responsibility to keep the rating agencies advised of itsobjectives, strategies, and financial status. The University’s administration will providethe rating agencies with full and timely access to the information it needs they need.This debt policy requires full and timely financial information. To that end, the Universitywill report to the Board of Regents throughout the fiscal year on the basis of generallyaccepted accounting practices.4.2.3—KEY FINANCIAL RATIOThis particular ratio has been selected relying on key items in the University’s financial statementsand each project’s detailed financial plan. It is a critical measure used by the rating agencies in evaluatingthe ability of an issuer to service and repay debt. Additionally, the University may elect to monitor otherselected ratios (if suggested by rating agencies) to provide further information regarding the University’sfinancial performance. The target for this ratio will be used as a guidepost, not a firm boundary, and willbe interpreted with some flexibility.4.2.4—DEBT SERVICE COVERAGE RATIOExcess of Project Operating Revenues +Debt Service Coverage Ratio = Depreciation + InterestAnnual Principal + Interest(Debt Service)The Debt Service Coverage Ratio measures the excess operating revenues, depreciation, and interestpayments relative to annual principal and interest payments. This ratio provides a measure of theproject’s net income stream (excluding depreciation and interest) available to meet its debt serviceobligations.The target for this ratio is project specific. On a project-by-project basis, the target for this ratio is tobe no less than 1.25X.The University recognizes and embraces the fact that financial leverage (debt), when usedstrategically, serves an integral role in helping to fund the capital needs required to achieve its missionand strategic objectives. To that end, future debt management decisions are to be evaluated within theframework of this policy.(RM, 1-4-62, p. 6982; 3-29-00, p. 26909; 1-27-04, p. 28924)THE UNIVERSITY OF OKLAHOMA 225