Fitch Ratings said it downgraded the rating on $225.2 million Illinois Finance Authority revenue bonds issued on behalf of Roosevelt University to BBB-minus.
The rating outlook is revised to stable from negative.
The bonds are a general obligation of the university. Additional security provisions include a cash-funded debt service reserve, funded at maximum annual debt service (MADS), and a first lien mortgage on the financed facilities.
The BBB-minus rating reflects the university's fourth consecutive year of negative operating margins, which are weaker than forecasted. Fiscal 2015 is also expected to be negative.
Roosevelt's heavy reliance on student-generated revenues makes financial projections dependent on achieving enrollment goals. Enrollment growth has been uneven, with strength in undergraduate but weakness at the graduate level.
The limited nature of the university's existing financial cushion is a concern, especially relative to its highly leveraged position. MADS burden is a very high 15.4% of fiscal 2014 operating revenues. This concern is only partially mitigated by the university's ability to meet MADS coverage and lack of additional debt plans.
The university's conversion of it Schaumberg campus to focus on health sciences, coupled with the retirement of the university President in June 2015, presents enrollment and management uncertainty.
