Moody’s Investors Service last week revised its outlook for Fordham University to stable from positive as the school plans to increase its borrowing more quickly in advance of expected fundraising and balance-sheet growth.
Moody’s assigns an A2 rating to $415 million of Fordham debt, which includes an upcoming new-money issuance of $150 million. The Dormitory Authority of the State of New York will be the conduit issuer.
Fordham has a $1 billion, 20-year master plan to expand its Lincoln Center campus in Manhattan. The university anticipates it can reduce construction costs by beginning the first phase of the master plan now.
“Fordham has moved forward with this phase of construction in order to realize significant cost savings in today’s market,” a Moody’s report said. “The project was initially budgeted at $350 million and Fordham now estimates that total project cost will be $250 million.”
Bond proceeds will help finance a new 463,000 square-foot building for the university’s law school and a 430-bed undergraduate student residence hall. Along with the $150 million bond offering, land-sale proceeds will help support the project.
Of Fordham’s outstanding debt, $96 million is variable-rate demand bonds with a tender feature and $50 million of five-year long-term bonds with a put feature at the end of the term.
Moody’s considers the bonds to be demand debt. Risks on the debt include a possible acceleration of repayment and rollover risk to extend or replace liquidity facilities, according to analysts.
Credit strengths include positive operating and cash-flow margins and debt-service coverage of 3.45 times in fiscal 2010.
The school’s fundraising is strong and student demand has increased, with a 52% increase in applications during the last five years.
Total operating revenue makes up 81% of the operations budget and “the ability to continue to grow student charges is a critical credit factor,” Moody’s said.
Undergraduate enrollment is more than 7,900 and tuition was $35,825 during the 2009-2010 school year, according to the school’s website.
Fordham has nearly 4,000 graduate students and another 1,650 students in its law school.
Graduate tuition ranges from $670 to $1,190 per credit. The cost to attend the law school is $44,370.