Vassar College, N.Y., Outlook Revised to Negative by S&P

S&P Global Ratings said it revised the outlook to negative from stable and affirmed its AA-minus rating on New York State Dormitory Authority's series 2010 revenue bonds and the Dutchess County Local Development Corp.'s series 2013 revenue bonds, issued for Vassar College.

At the same time, S&P said it assigned its AA-minus rating, with a negative outlook, to the corporation's $95 million series 2017 revenue bonds, issued for Vassar.

"The negative outlook reflects the continued operating deficits, coupled with lighter available resources, as measured by expendable resources, which could experience continued pressure in fiscal 2017 and possibly into fiscal 2018 depending on how Vassar and its new president manage Vassar's operating budget over the next couple of years," said S&P credit analyst Jamie Seman.

The AA-minus rating reflects Vassar's very strong enterprise profile, with stable enrollment trends and very strong demand and selectivity, S&P said. The financial profile is strong, with significant investments compared with debt outstanding, offset by weak operating results that the rating agency expects to continue during the next two years.

At fiscal year-end 2016 (June 30), Vassar had cash and investments equal to 3.84x debt. The  rating also reflects the continued pressure on the college's credit profile from its full-accrual operating deficits, S&P said. Combined, these criteria factors lead to an indicative stand-alone credit profile of a-plus.

The AA-minus rating, S&P said, better reflects Vassar's enterprise profile, which is more consistent with those of its AA-minus peers, as well as its significant endowment.

The rating could be lowered if the college fails to improve full-accrual operating results, making progress toward at least break-even levels during the next two years, or if financial resources decrease significantly, the rating agency said.

It does not expect to revise the outlook to positive during the outlook time frame. Nevertheless, it could consider a return to stable outlook and a higher rating if Vassar reports significant growth in financial resources, combined with sustained progress toward at least break-even full-accrual results.

Management plans to use the bond proceeds from the 2017 bonds to refinance the series 2007 Dormitory Authority of the State of New York Vassar College revenue bonds.

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