Drexel University’s bond rating outlook was revised to negative from stable by S&P Global Ratings Thursday on concerns about operating margins at the Philadelphia private university.

S&P affirmed its long-term A rating for the Pennsylvania Higher Education Authority's outstanding bonds issued for Drexel, but noted the college's fiscal struggles in the 2017 fiscal year stemming from recent and upcoming strategic investments aimed at boosting the school's academic profile. S&P credit analyst Charlene Butterfield said Drexel's full accrual operating margins are expected to remain compressed at “roughly breakeven levels” for the next year or two as university officials seek to boost applicants and matriculation rates.

Buckley Green on the campus of Drexel University in Philadelphia.
S&P Global Ratings revised its outlook on Drexel University to negative from stable. Drexel University

“We anticipate that Drexel's available resources ratios will increase in fiscal 2017 as a result of strategic investments, though in our opinion, the growth may not be substantial enough to fully offset the weaker margins should available resources fail to rebound to solid levels in the next year or two,” said Butterfield. “Given the ongoing margin compression, we do not expect to consider a positive rating action during the next two years."

Moody’s Investors Service rates Drexel debt at A3. The school, which has total enrollment of around 26,000, is partnering on a large-scale mixed-use development project around the campus with Amtrak, the Southeastern Pennsylvania Transportation Authority, the Pennsylvania Department of Transportation and Brandywine Realty Trust.

The 30th Street District Plan envisions 18 million square feet of new development in University City that features an entirely new mixed-use neighborhood atop 88 acres of rail yards along the western bank of the Schuylkill River.

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