Standard & Poor's Ratings Services said it has lowered its long-term rating and underlying rating on the Delaware Economic Development Authority's $94 million revenue bonds issued for Delaware State University (DSU) to A-minus from A.
At the same time, Standard & Poor's lowered its stand-alone credit profile on the bonds to a-minus from a. Standard & Poor's also assigned its A-minus rating to the authority's $36.5 million series 2014 revenues bonds issued for DSU. The outlook is stable.
"The downgrade reflects our opinion of increased leverage coupled with increasing full-accrual operating deficits and weak financial resources for the rating category," said Standard & Poor's credit analyst Laura Kuffler-Macdonald. With this issue, DSU's long term debt will increase to $126 million from $94 million. "The university has had consistent operating deficits since 2007, but in the past four years, these deficits have increased."
Bond proceeds will finance the purchase a 416-bed student housing facility located on campus from Delaware State University Student Housing Foundation; acquire the former Sheraton Hotel and Convention Center, which is now known as the Living and Learning Commons (a 264-bed housing facility); and construct, equip, and furnish an optical science center for applied research.
DSU is a comprehensive, state-assisted, land-grant university whose 400-acre main campus is in Dover, approximately an hour south of Wilmington, Del. It is also a historically black college or university, and 73% of its full-time undergraduate student population is African-American. Headcount increased to about 4,644 in fall 2014 from a recent low of 3,534 in fall 2009, with enrollment gradually increasing in that time.
The stable outlook reflects the view that the university will adjust to the strained economic environment and uncertain funding levels and will make progress towards attaining balanced full-accrual operations. Factors that could lead to a downgrade within the next one-to-two years include additional debt without a commensurate increase in revenues; higher full-accrual operating deficits from 2014 levels; and any balance-sheet deterioration. The rating agency does not expect to raise the rating in the next two years.
