Standard & Poor's Ratings Services said it lowered its rating on Pennsylvania Higher Educational Facilities Authority's revenue debt, issued for Thomas Jefferson University (TJU), one notch to A from A-plus.
The outlook is stable.
At the same time, the rating service assigned its A rating and stable outlook to the authority's $301 million series 2015A and $60 million series 2015B revenue bonds.
The downgrade reflects Standard & Poor's assessment of the university's diminished financial profile due to the current debt issuance, which weakened financial resource ratios to levels below A category medians.
The rating service believes, what it considers, TJU's very strong demand profile and positive operating margins no longer sufficiently offset the financial resources it now views as low compared with category medians. In addition, the merger with Thomas Jefferson University Hospital System significantly changed TJU's revenue diversity, leaving TJU more vulnerable to revenue fluctuations at the health system level.
"We could raise the rating during the next two years if financial resource ratios were to improve to levels we consider more commensurate with A rating category medians, if the university were to generate healthier operating margins, and if the university were to maintain current demand trends," said Standard & Poor's credit analyst Emily Avila. "We could lower the rating during the next two years if the university's balance sheet were to weaken further, if operating margins were to remain below 2% beyond fiscal 2015, or if the university were to issue significant additional debt without commensurate financial resource ratio growth."
