New Jersey's Rutgers University was downgraded one notch by Standard & Poor's to A-plus from AA-minus on Sept. 25 due to diminished financial resources.
S&P analyst Ken Rodgers noted in his report that New Jersey's state university recorded full accrual based operating deficits in both fiscal 2013 and 2014 stemming largely from depreciation and one-time expenses from activities related to assuming 72% ownership of the former University of Medicine and Dentistry of New Jersey. The A-plus rating is one notch above the state of New Jersey's A rating.
S&P also lowered its ratings on Rutgers' $110 million series 2002A variable-rate demand general obligation refunding bonds and $80 million series 2002A variable-rate demand bonds to A-plus/A-1(short-term rating) from AA-minus/A-1-plus. The university had $43.20 million left outstanding on the 2002A series and $72.24 million on the 2009G as of June 30, 2014, according to S&P.
S&P's dropped Rutgers' rating on $65.8 million left in outstanding in commercial paper notes to A-1 from A-1-plus. The notes are secured by the university's general obligation and supplemented by a liquidity facility provided by Wells Fargo Bank for $200 million, according to S&P. The university is able to draw on the funds from the Wells Fargo Bank standby Commercial Paper purchase agreement.
Rutgers' long-term bonds were given a stable outlook by S&P. Rodgers said a future upgrade would be predicated on student demand remaining strong and improved financial performance.
Rutgers spokesman E.J. Miranda said in response to the S&P downgrade that the move does not take into account how the acquisition of UMDNJ has enhanced the school. He was also pointed out that S&P's analysis relied on data more than a year old and did not take into account Rutgers' fiscal year 2015 information.
"The integration of Rutgers with most of the former UMDNJ has created a university that is academically stronger and better prepared to serve the needs of the people of New Jersey," said Miranda. "The S&P rating does not reflect this progress."
Rutgers, which operates three campuses in New Brunswick, Newark and Camden, has a total student enrollment of 66,013, according to the university's website. The school is rated Aa3 with a negative outlook by Moody's Investors Service and AA-minus by Fitch Ratings.