NEW YORK - Moody's Investors Service said it has downgraded Wellesley College, Mass.'s outstanding bond ratings to Aa1 and Aa1/ VMIG 1 from Aaa and Aaa/VMIG 1 and assigned Aa1 ratings to Wellesley's (Wellesley or the college) $55 million of fixed-rate Series J revenue bonds issued through the Massachusetts Finance Development Agency and $95 million of fixed-rate Series K taxable revenue bonds.
The rating action reflects a significant increase in operating leverage with this new debt issuance combined with the stagnant to negative trends of the college's core revenue streams -- net tuition revenue and endowment draw which has contributed to imbalanced operations by Moody's calculation.
The outlook has been revised to stable from negative, at the lower rating level.
Wellesley's Aa1 rating reflects the college's superior student market position with strong student demand, robust fundraising, and large financial resource base providing significant support for debt and operations.
Offsetting these factors are the college's imbalanced operating performance (by Moody's calculation) with limited operating cash flow providing relatively thin debt service coverage, stagnant net tuition revenue and a plan for extensive campus renovation partly funded with this debt issuance. The Aa1/VMIG1 on the college's variable rate demand bonds reflects the strength of the college's self liquidity program.
