BRADENTON, Fla. – Sweet Briar College received a four-notch bond upgrade thanks to efforts to keep the 114-year-old Virginia women's institution open.
The college still remains in junk territory after S&P Global Ratings raised its ratings to B from CCC Tuesday on $15.9 million of outstanding revenue bonds issued in 2006 for the college by the Amherst Industrial Development Authority.
The outlook is stable.
"We raised the rating based in part on our Not-for-Profit Public and Private Colleges and Universities methodology and our view of the current leadership's efforts to restore sustainability after previous announcements of closure," said analyst Sussan Corson.
Sweet Briar's new management team and board have been in place since July of this year, and is still formulating a management structure and policies, Corson said.
The college expects to hire a new president in 2017 to succeed Phillip Stone, who plans to retire.
Stone became president after a deal was brokered in June 2015 to end several legal challenges that successfully kept the college from closing, including a lawsuit filed by the Save Sweet Briar alumnae organization and its fund-raising efforts.
In addition to the 2006 bonds, the college has $9 million in a loan directly placed with a bank in 2011.
The college has made regularly scheduled debt service payments to date, according to S&P.
All debt is fixed-rate, although the bank loan will convert to variable rate in 2018 with a put option at that time and every five years, thereafter.
"The 2011 financing agreement includes terms that we believe expose the college to contingent liquidity risk through event of default provisions that could trigger principal acceleration after a 30-day cure period," Corson said. "We believe an imminent covenant default or another event of default under the bank loan or bond documents to trigger principal acceleration on bonds outstanding is unlikely."
The prior board of directors announced in March 2015 that the college would close after the end of summer session citing "insurmountable financial challenges" that included declining enrollment and an unsustainable increase in the tuition discount rate to attract students.
Sweet Briar is a small, private liberal arts college with a 3,250-acre campus near Lynchburg.
Some 376 students enrolled this fall, down from 700 in the fall of 2014, and likely attributable to the disruption over its potential closing last year.
S&P said its B rating on the 2006 bonds reflects the "drastic" reduction in enrollment, volatility in operations that are at risk of negative future performance, recent turnover of all management and the governing board, and continued weakness in selectivity and matriculation rates.
The rating also reflects that the college has sufficient financial resources, with fiscal 2015 expendable resources of approximately $46 million representing 81% of operations, and low maximum annual debt service burden equal to 3.6% of operating expenses, S&P said.
