Fitch Ratings said it has downgraded approximately $216.6 million of outstanding New Jersey Educational Facilities Authority revenue and revenue refunding bonds issued on behalf of The College of New Jersey issue to AA-minus from AA.
The rating outlook remains stable.
The bonds are a general obligation of the college, payable from legally available funds.
The downgrade is driven by TCNJ's significant financial leverage supported by slim financial resources and narrowing operating margins, Fitch said. These tighter margins are vulnerable to lower than budgeted enrollment and flat-to-weakening operating support from the state of New Jersey (rated A/stable outlook by Fitch).
TCNJ's debt burden is high for the rating category, though the college continues to generate sufficient net income available for debt service to cover its annual obligations, according to the rating agency. This high debt level should moderate over time due to fairly rapid amortization; however, additional debt may be issued in the next two to three years putting pressure on already thin resources available to support repayment.
Student-generated revenues are the primary revenue driver. TCNJ's headcount enrollment is generally flattening, while enrollment growth in prior years has served to help offset volatility in state appropriations. TCNJ will need to sustain stable enrollment trends to support operations, Fitch said.
The College of New Jersey's issuance of additional debt, including the planned fiscal 2018 bond issuance, without a commensurate increase in financial resources available to support repayment, may trigger a negative rating action, according to Fitch.
The College of New Jersey's issuance of additional debt, including the planned fiscal 2018 bond issuance, without a commensurate increase in financial resources available to support repayment, may trigger a negative rating action.
