Stockton College’s $40M Deal

The New Jersey Educational Facilities Authority tomorrow will competitively sell $40.4 million of debt on behalf of the Richard Stockton College of New Jersey to help finance capital improvements at the school. The bonds will be sold via Ipreo’s Parity system and offer maturities out to 30 years. Acacia Financial Group Inc. is the financial adviser on the deal and Gibbons PC is bond counsel. Insurance will be available at the bidder’s request, according to the preliminary official statement.Bond proceeds will help finance a residential housing complex, replacement of a heat pump, and overall safety upgrades and infrastructure improvements throughout the campus.Fitch Ratings and Moody’s Investors Service rate the sale A and A2, respectively. Moody’s earlier this month revised the credit’s outlook to negative from stable due to “the college’s substantial capital plans and expected rise in debt and debt service obligations within the next year,” according to a Moody’s press release. Fitch assigns the school a stable outlook. The institution has $114 million of outstanding debt, not including next week’s sale, and Stockton anticipates selling an additional $91 million in fiscal 2008, according to a Fitch statement.Fitch anticipates the school will manage future debt issuance and capital spending if enrollment does not increase or if state funding for operations continues to decrease, although analysts did note the school’s challenges.“Further declines in liquidity, continued erosion in matriculation rates, and/or increased debt without a corresponding rise in resources available for its repayment may pressure the rating and/or the outlook,” according to a Fitch release.Public higher educational facilities in New Jersey are highly leveraged, with the state’s 12 public colleges and universities amassing $2 billion of debt collectively, according to a recent State Commission of Investigation report. Budgetary pressures at the state level force colleges and universities to finance capital projects themselves, without the assistance of general obligation debt.Enrollment has increased at Stockton, reaching 6,276 full-time equivalent students in the fall of 2007, a 6% increase over the previous three years. The public liberal arts college has a strong niche within southern New Jersey, with many students transferring to Stockton from a two-year higher educational facility, according to Moody’s.Stockton is located two-hours south of New York City and one hour from Philadelphia in Pomona.