Debt load, uncertain enrollment weigh on Rider University rating outlook
An increased debt load and uncertain enrollment future prompted a revision of Rider University’s credit outlook to negative from stable by Moody’s Investors Service in advance of a $40 million revenue bond sale geared toward facility improvements.
Moody’s assigned a Baa2 rating Wednesday for Rider's revenue bond sale that will be issued through the New Jersey Educational Facilities Authority in mid-November to finance expansion of a science and technology center along with renovations to other academic buildings and residence halls on the private university's main Lawrenceville, N.J. campus.
Moody’s analyst Pranav Sharma noted concerns about an uncertain timeline and enrollment impact from Rider planning to sell its 23-acre music campus in Princeton, N.J. along with a looming increased debt service burden.
“The negative outlook reflects expectations of thin operating performance over the next several years, with uncertainty around ability to achieve revenue growth and expense reduction targets, combined with increased leverage,” said Sharma.
"The planned bond-funded projects will allow us to improve several academic and residential buildings, thus enhancing our competitiveness and allow for even further growth of the university," said Kristine Brown, a Rider assistant vice president. "Our cost reduction efforts ultimately support better scholarships and greater student affordability, another factor in enrollment growth and retention."
Moody's affirmed Rider’s Baa2 rating, affecting on $41 million of outstanding debt for bonds issued in 2012. Sharma said Rider’s rating could be raised if it shows “significant” growth in unrestricted liquidity along with sustained boosts to student demand and operating cash flow. The school could see a downgrade if “a material increase” in debt arises beyond the November bond issue, according to Sharma.
Bonds for the upcoming sale expected on Nov. 14 are general obligations of the university and are secured by a mortgage and security agreement for which certain property is pledged along with tuition and fees. The university enrolls roughly 4,650 students and generated $152 million of revenue in the 2017 fiscal year, according to Moody’s.