Rutgers University received a boost when Moody’s Investors Service revised its outlook on the school’s bonds to stable from negative, citing stabilized operations.
Moody’s affirmed Rutgers’ general obligation bond rating at Aa3 for its roughly $2 billion of outstanding debt in a report released late Wednesday. The stable outlook assigned to New Jersey’s flagship public university means its rating should hold steady for the next one to two years, according to Moody’s.
“Revision of the outlook to stable is based on our expectations of stabilizing operations at slightly better than break-even levels, resulting in modest operating cash flow growth,” said Moody’s analyst Susan Shaffer in the report. “It also incorporates our belief that the university will be able to absorb some reductions in state and federal funding, that it will limit any additional debt to current levels, and that liquidity will not deteriorate further.”
Shaffer noted that the Aa3 rating reflects the university’s large presence in New Jersey and positive exposure from entering the Big Ten Conference for athletics in 2014. She said university leadership has spearheaded increased fund-raising efforts, which provides a “growing cushion” that can withstand the potential of moderate revenue volatility.
Rutgers could receive an upgrade if it boosts reserves and cash flow levels along with attracting more students from outside New Jersey. The rating could drop however if New Jersey’s credit rating faces further pressure or the state significantly reduces financial support. Moody’s rates New Jersey GO debt at A3, the second lowest credit rating ahead of only Illinois.
Rutgers is planning a $100 million GO commercial paper transaction on June 30 aimed at providing the university increased flexibility to achieve capital and strategic goals through short-term financing. Moody’s assigned a P-1 short-term rating to the sale, which is aided by a revolving credit agreement with Bank of America.
Full-time student enrollment numbers over 60,000 at Rutgers’ campuses in New Brunswick, Newark and Camden. The university is in the midst of a master plan to upgrade infrastructure through 2030 that is slated to include new borrowing.