CHICAGO – Moody’s Investors Service stung Wright State University in Ohio with a triple-notch downgrade over the swift and severe deterioration of its balance sheet.
Moody’s lowered the rating Tuesday to Baa2 from A2 and assigned a negative outlook. The action concludes Moody’s review of the schools launched in March. The action impacts $68 million of debt.
“The downgrade is driven by WSU's severe financial deterioration in a short period of time, with significant operating deficits in fiscal year 2016 and projected for fiscal year 2017 resulting in substantial reduction in liquidity,” Moody’s said.
The school has an expense reduction plan aimed at restoring fiscal balance in fiscal 2018. “Should the university not accomplish its expense realignment plan, it will continue to have deficit operations and potential further draw downs on liquidity, which could trigger additional downward rating pressure,” Moody’s warned.
The Baa2 favorably incorporates WSU's regionally important role as a low-cost public university serving the Dayton region, with good scale, solid fundraising, diverse revenue, and a predictable debt structure. It also factors in the university's relationship with the Aa1-rated state, which has implemented enhanced monitoring of the university's financial condition.
The school’s bonds are secured by a broad pledge of the university's general receipts, which includes all legally available revenue except money raised by taxation, state appropriations, or restricted gifts. There are no debt service reserve funds. WSU offers undergraduate, graduate and professional level degrees and operates a School of Medicine. In fall 2016, enrollment stood at nearly 18,000 students.