Standard & Poor's Ratings Services said it lowered its long-term and, where applicable, underlying rating to A from A-plus on various series of outstanding bonds issued by the Camden County Improvement Authority (CCIA), N.J. and by the New Jersey Educational Facilities Authority (NJEFA) on behalf of Rowan University.
In addition, it assigned its A rating to the Gloucester County Improvement Authority's (GCIA) $36 million series 2015A revenue bonds and $78 million series 2015B revenue refunding bonds also issued on behalf of Rowan. The outlook is stable.
At Rowan's fiscal year-end June 30, 2014, long-term debt (including capitalized leases) totaled $610.7 million and, with the current series 2015A and B bond issuance, will increase to approximately $686.5 million on a pro forma basis (including also a separately rated GCIA $58 million series 2015A bond issue that is for Rowan and carries the county's guaranty).
"The lowered and assigned ratings reflect our view that, although Rowan's enterprise profile is strong, being well-managed and with a good enrollment trend," said Standard & Poor's credit analyst Ken Rodgers, "its financial profile is more comparable with the lower rating."
There have been some recent signs of weakened financial operating performance on a full-accrual basis over the past two years and a significant increase in debt over roughly the same period and continuing with the current debt issuance. Also, since Rowan receives about a third of its revenue from the state of New Jersey (general obligation [GO]; A/Stable), Rowan's rating reflects a limited dependence on ongoing funding from New Jersey for its operations, although other revenue sources provide the majority of its revenue and are of sufficient strength and breadth so as to allow it to rate the university at the same rating as the state.
"The stable outlook reflects our expectation that over the next two years, Rowan's enrollment growth will continue and its finances will show some improvement both from an operational and financial resources standpoint," said Rodgers. The agency expects management to weigh carefully the timing and amount of any future debt issuance as financial operations could become constrained by the current high debt burden.
"Also, Rowan may face additional cost pressure from expansion of its programs, multiple-campus development, and faculty recruitment as it seeks broader recognition as a comprehensive research-based university," added Rodgers.
A higher rating is unlikely over the outlook time horizon but could result from very strong enrollment growth, much stronger financial performance and a significant increase in financial resources while debt decreases some. A lower rating is possible if enrollment weakens unexpectedly, financial performance deteriorates, financial resources decline, or additional debt issuance pressures the rating.
