Moody’s Investors Service has revised its outlook to negative from stable on Hamline University’s Baa1 rating ahead of its $15 million refunding bond issue this week.
The action affects $30 million of debt. The school is issuing the debt through the Minnesota Higher Educational Facilities Authority.
“The rating outlook is revised to negative from stable, reflecting concerns regarding the university’s low financial resource levels relative to comparably rated institutions, a debt structure with significant variable-rate debt supported by letters of credit, and possible debt plans that would further strain balance-sheet leverage,” analysts wrote.
Hamline benefits from a sound student market position in the St. Paul-Minneapolis area with an enrollment of 3,883 full-time students, up 13% since 2006, with nearly 53% enrolled in graduate or professional programs. Its operating performance is consistently favorable and it enjoys good fundraising results.
It’s challenges include a debt portfolio of which half is in variable-rate mode; monthly liquidity at $13 million, providing 60 days cash on hand; and financial resources of $7.7 million in fiscal 2009, down from $24.8 million in fiscal 2008 due to investment losses. Analysts expect an increase back to 2008 levels in 2010.
Hamline University has plans to issue up to $40 million of debt to finance the construction of a student center.