DALLAS — After two years of falling enrollment, Standard & Poor's has lowered the outlook on Lubbock Christian University's BBB rating to negative, citing the small private university's dependence on tuition revenue.
The university has about $20.6 million of outstanding debt and a "modest" endowment of $8.6 million, according to S&P. The last bonds were issued in 2007.
"We understand the university could issue an additional $10 million to $20 million of new debt to support new housing during the two-year outlook period," S&P analyst Ashley Ramchandani noted. "While the timing of the issuance remains unclear, we anticipate that any issuance and debt would be commensurate with growth in financial resources."
Enrollment for fall 2014 was 1,902 full-time students, down about 5% from fall 2013 and an 11% decline from the 2,135 enrolled in fall of 2012.
The university plans to use about $100,000 from its endowment to boost enrollment, according to analysts. LCU also plans to add two graduate programs.
Enrollment currently is made up of 86% traditional, undergraduate students and 14% graduate students. Graduate enrollment is down 2% overall with 463 students enrolled in fall 2014, compared with 471 in fall 2013, analysts said.
Established in 1957 as a junior college by members of the Churches of Christ, LCU became a four-year institution in 1972 and advanced to university status in 1987. Located on a 155-acre campus in the West Texas city of Lubbock, LCU offers 38 bachelor and 12 master degree programs. A majority of the students are from Lubbock, but LCU's geographic draw extends throughout Texas with some reach into contiguous states. LCU is affiliated with a kindergarten through grade 12 private school that has been operated as a separate entity since 2009.
"We would consider lowering the rating if LCU's enrollment declines significantly such that operations continue to be negative on both a full-accrual and cash basis, or if financial resources slip below current levels relative to expenses and outstanding debt," Ramchandani said. "We could also consider lowering the rating if the college were to issue additional debt without commensurate growth in financial resources."
