Franklin Pierce University Upgraded to CCC-Plus by S&P

Standard & Poor's Ratings Services said it raised its long-term rating to CCC-plus from CCC on  debt issued for Franklin Pierce University (FPU) by New Hampshire Health & Educational Facilities Authority.

The outlook is stable.

"The revised rating and stable outlook reflect our assessment of Franklin Pierce's effective management of its financial restructuring, improved operations that produced an approximately $3 million operating surplus in fiscal 2015, and modest enrollment growth," said Standard & Poor's credit analyst Ashley Ramchandani.

At the time of Standard & Poor's most recent review, the university had failed to make a required monthly deposit to the trustee-held debt service fund on April 20, 2014, and lost its line of credit, which it relied on heavily for seasonal cash flow.

At that time, management acquired a term loan in the amount of $1.86 million and a $5 million line of credit, which included a priority lien on gross revenues, which effectively subordinates bond holder security. Management reports that it repaid outstanding debt service due to the trustee in October 2014 as required by its forbearance agreement and that it is current on payments and does not anticipate any future delays in debt service payments. 

"Our view is that Franklin Pierce University's financial resources are very weak and that liquidity is limited," added Ramchandani. "This, along with the university's term loan outstanding and line of credit that effectively subordinates the university's bonds -- which we view as a key credit risk – limits the rating."

Pursuant to Standard & Poor's CCC criteria, with limited unrestricted assets available to meet obligations, weak operating liquidity, and violation of covenants associated with its line of credit, Franklin Pierce is currently vulnerable to nonpayment and is dependent on favorable business conditions to meet its financial obligations.

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