DALLAS – Indiana's Purdue University says it doesn’t expect a union with for-profit distance learning enterprise Kaplan University to adversely impact its balance sheet or rating but S&P Global Ratings says it will be watching.

The state land-grant university carries triple-A ratings from S&P and Moody’s Investors Service.

Purdue University doesn't expect its Kaplan acquisition to impact its credit. Bloomberg

On Friday, S&P affirmed the rating but said it would be watching closely to discern what financial impact, if any, the acquisition might have on the university’s credit profile.

“We did discuss with management their plans and essentially at this time we view the merger as credit neutral just given the distinct organizational and also financial nature of the new potential university,” said Jessica Wood, S&P’s primary analyst on Purdue.

Wood said that S&P plans to assess the union more fully as information becomes available. On Aug. 11 the plan was approved by the Indiana Commission for Higher Education but it must still be approved by the US Department of Education and the Higher Learning Commission.

S&P says that the merger is a big deal because it brings together two very different types of organizations and will allow the university to pursue a different enrollment base. “This is a merger of two very distinct entities; Purdue has in or view very strong brand recognition and value proposition,” said Wood. “If this does move forward we will be looking for potential impact to Purdue’s financial operations and resources, to overall student demand and if there is any brand dilution. At this point we don’t have a sense of that.”

Purdue and Kaplan are each accredited by the Higher Learning Commission. The new university will be separately accredited. “The process will not impact Purdue University’s current accreditation,” said senior vice president and assistant treasurer at Purdue, James Almond. “Currently, no debt is anticipated as part of the transaction.”

Almond said that the new university is seeking approval by the U.S. Department of Education to be eligible to administer federal financial aid.

In the deal between Purdue’s trustees and Graham Holdings, Kaplan University’s parent company, Purdue will pay just $1 for Kaplan in exchange for a lengthy contract for services. The still unnamed “new university” will continue to offer Kaplan’s courses in its certificate and degree programs at current prices and take on Kaplan’s 32,000 students, 2,462 faculty members and 15 campuses. The acquisition would be set up as a new non-profit. It would operate as a wholly owned subsidiary of the public university.

Purdue University has approximately $100 million in debt issuance plans over the next two years and which would bring its total debt load to $1 billion, according to S&P. The bulk of the debt is student fee backed bonds.

The university is one of Indiana's two flagship universities, and a member of the Big Ten athletic conference. The university has four campuses, including its main West Lafayette campus and three regional campuses, two of which are currently undergoing administrative consolidation. The university is large with a nearly 69,000 headcount.

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