Fitch Ratings last week upgraded Fairleigh Dickinson University to BBB from BBB-minus, as the private institution has shown positive operating margins during the past few years.
The rating outlook is stable.
Fairleigh Dickinson has $88.4 million of outstanding revenue debt issued through the New Jersey Educational Facilities Authority. The school’s operating margin for fiscal 2010 was 6.1% following a streak of positive years since fiscal 2005. The university had $72.4 million of available funds at the end of fiscal 2010 due to annual surpluses and market gains, according to the rating agency.
“The upgrade to BBB primarily reflects consistently positive operating results coupled with FDU’s ability to maintain stable financial resources while concurrently funding near-term capital projects without increasing leverage,” Fitch analysts wrote.
The university plans to finance ongoing capital projects with planned gifts, operating revenue, and capital campaign funds rather than taking on more debt.
The school may borrow $25 million to $35 million of long-term debt in the next two to three years to help finance a new student union center at its Metropolitan campus in Teaneck, but “a student fee would likely be implemented to mitigate the debt service costs,” according to Fitch.
Fairleigh Dickinson relies upon student tuition and fees to support operating needs, with 92% of total unrestricted operating revenues coming from student-generated income.
Fitch considers the school’s dependence on tuition and fees to be “quite high.”
The university’s full-time equivalent enrollment reached 8,363 in fall 2010, with an average five-year growth of 1.4% per year.
The school serves about 12,200 students, including 8,600 undergraduates and 3,600 graduate students, according to the university’s website.
Undergraduate tuition for the current school year ranges from $30,140 to $32,490.
Fairleigh Dickinson is New Jersey’s largest private university and was founded in 1942. It has two campuses in northern New Jersey.
Moody’s Investors Service and Standard & Poor’s do not rate the credit.
