Dec 17 -
-- On Dec. 13, 2012, Standard & Poor's revised its outlook on the United Kingdom 'AAA' long-term sovereign credit rating to negative from stable.
-- In accordance with our government-related entity criteria, we are therefore revising the outlook on King's College London to negative from stable.
-- At the same time, we are affirming the 'AA' long-term issuer credit rating on King's College.
-- The negative outlook reflects the negative outlook on the U.K. rating. If the ratings on the U.K. were lowered by one notch, or the outlook revised back to stable, then we would likely make the same changes to the rating on King's College, reflecting our opinion of the likelihood of extraordinary government support.
On Dec. 17, 2012, Standard & Poor's Ratings Services revised its outlook on King's College London (King's), a U.K.-based university, to negative from stable. At the same time, we affirmed the 'AA' long-term issuer credit rating.
The outlook revision reflects that on the United Kingdom 'AAA' long-term sovereign credit rating (see "Outlook On United Kingdom Revised To Negative; 'AAA/A-1+' Ratings Affirmed," published Dec. 13, 2012 on RatingsDirect on the Global Credit Portal).
The rating on King's reflects the university's stand-alone credit profile (SACP), which we assess at 'aa-', as well as our opinion of a "moderately high" likelihood that the government of the United Kingdom (AAA/Negative/A-1+), working through the Higher Education Funding Council for England (HEFCE), would provide extraordinary support so as to avoid a cash default, in the event of financial distress. In accordance with our revised criteria for government-related entities (GREs; see "Rating Government-Related Entities: Methodology And Assumptions," Dec. 9, 2010), our view of a "moderately high" likelihood of extraordinary government support is based on our assessment of King's:
-- "Important" role for the U.K. government and its public policy mandate; and
-- "Strong" link with the U.K. government, demonstrated by its track record of providing support.
The SACP on King's is supported by its strong reputation for research, rising student demand, and substantial cash reserves. Vulnerabilities include the uncertainty over the impact of reforms to the higher education system, and the adjustment process to medium-to-long-term constraints in public-sector funding, although we believe that ongoing government support will continue to be a positive rating factor. King's is also exposed to some risks associated with its planned estate program; major work is planned for the next six years, with a large share concentrated in 2012-2013.