Hofstra University received a one notch upgrade to A2 by Moody's Investors Service.
Moody's analyst Pranav Sharma wrote in a report Friday that the outlook for the private Long Island university's $168 million of bonds is stable thanks to "a strong operating performance" with manageable near-term borrowing plans. Sharma said university officials have reported plans to borrow for some deferred maintenance projects, a new business school estimated to cost $29 million and a school of engineering building that could cost up to $50 million. The engineering school facility has been approved for partial funding by a New York State grant.
"The upgrade to A2 is driven by a trend of strong operating performance and material growth in financial reserves." said Sharma. "The A2 rating reflects Hofstra's operating scale, enhanced academic program diversification and strong financial leadership contributing to solid operating cash flow margins."
Its bonds were issued through the Town of Hempstead Industrial Development Agency and the Nassau County Industrial Development Agency.
Sharma added that the rating also reflects a competitive environment against competing colleges that have more resources to fund financial aid packages along with student tuition accounting for 80% of operating revenue. Hofstra, which is in Hempstead, N.Y., about 25 miles from Manhattan, has seen improved financial flexibility with a 40% increase in total cash and investments for the last five years, according to Sharma. It generated more than $400 million of operating revenue in the 2015 fiscal year.
Hofstra enrolled roughly 11,000 full-time students for the fall 2016 semester. The university has added new academic offerings in recent years including the establishment of the Hofstra Northwell School of Medicine and the Fred DeMatteis School of Engineering and Applied Science.
"Hofstra's strategic positioning is very good given its large diversified enrollment and investment in establishing new academic programs, reflecting changing student interests and demand," said Sharma. "Its diversified programmatic offerings provide broad stability in the event of a downturn in any single area."
Sharma added that the university had $448 million in monthly liquidity as of Aug. 31, 2015, which equates to 470 monthly days cash on hand. He said the university is benefiting by an improved student market profile that includes expanded geographic diversification with "consistent growth in net tuition per student."
