Atlantic City expansion boosts Stockton University rating outlook

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Stockton University’s ability to meet enrollment targets at its new Atlantic City satellite campus positioned the New Jersey public college for an upgrade.

Moody’s Investors Service revised the outlook for its Baa1-rated Stockton debt to positive from negative citing revenue gains from the new Atlantic City campus that debuted last September. The change applies to $281.4 million of outstanding bonds issued through the New Jersey Educational Facilities Authority and the Atlantic County Improvement Authority in 2016.

“The revision of Stockton University's outlook to positive from negative reflects successful delivery of the Atlantic City expansion and attainment of revenue and enrollment projections during this period of substantial investment and growth,” Moody’s analyst Jeffrey Kaufmann wrote Thursday. “Additionally, New Jersey's ongoing commitment to Atlantic City's redevelopment and the currently more favorable state funding commitment continue to support Stockton's strategic priorities.”

Moody’s rates Stockton one notch below Fitch Ratings, which downgraded the university’s debt one notch to A-minus last June citing cash flow challenges stemming from escalating debt service obligations tied to the Atlantic City expansion. Stockton purchased land that formerly housed Atlantic City High School as part of a public-private partnership with Atlantic City Development Corp. The university’s main 1,600-acre campus is about 10 miles west of Atlantic City in Galloway.

Stockton saw its cash flow margins improve 10.3% in the 2018 fiscal year driven by a 7.7% growth in net tuition and fees along with a nearly 20% increase in state aid, according to Moody’s. The university’s 2019 fiscal year results are projected to be positive with the school outperforming budget expectations, Kaufmann said.

“It is very satisfying to see that our efforts to improve Stockton’s financial standing have been recognized,” Harvey Kesselman, the university’s president, said in a statement. “Going directly from a negative to a positive outlook is a huge achievement.”

Stockton has seen steady enrollment growth at around 3% annually in recent year up to 9,621 full-time students for the fall 2018 semester, according to Moody’s. The university, which has boosted enrollment by 13% since 2014, is projecting its enrollment headcount to reach 10,000 by 2021. The Atlantic City campus is slated to eventually house around 1,000 students and is home to Stockton’s Hospitality and Tourism Management Studies program.

“We appreciate the support we have received from the community and the State and are hopeful that additional state support will be provided to continue with our expansion in Atlantic City,” Kesselman said. “Stockton is growing, and we will continue to plan our expansion in a manner that is fiscally responsible for our students and stakeholders.”

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Higher education bonds Ratings New Jersey Educational Facilities Authority New Jersey