NEW YORK - Standard & Poor's Ratings Services said it revised its rating outlook to negative from stable on debt issued for Transylvania University, Ky. by Lexington-Fayette Urban County Government. In addition, Standard & Poor's assigned its A-plus rating to the approximately $6.5 million series 2009 revenue bonds issued for the university by Lexington-Fayette Urban County Government and affirmed its A-plus underlying rating (SPUR) on Transylvania's outstanding debt.
The outlook revision reflects Standard & Poor's belief that the university will face significant operating pressure in the current economic environment, which will be a challenge for it to manage. Transylvania has budgeted a high and unsustainable spending rate from its endowment of 8.1% for fiscal 2009, which the university relies on to balance operations. In addition, there is significant competition in the geographical area for students, which may pressure the university's already high tuition discount rate of 46% for 2008.
"If management is able to manage through the current economic environment and maintain balanced operations on a full accrual basis and stable enrollment, as well as a financial cushion consistent with the rating category, then we would consider returning the outlook to stable," said Standard & Poor's credit analyst Emily Wong.
The university will use the series 2009 bond proceeds to fund a portion of the costs of various capital projects currently underway on campus including a new residence hall, renovation of laboratory space, renovation of the fine arts center, and expansion of the library. Total outstanding debt after this issuance is $17.7 million.
