Bond status downgrade creates financial uncertainty for Rider – The Rider News
By Sarah Siock
After a tough year that left the university with a shortfall of about $9.5 million, Rider continues to tread down a path of financial uncertainty, with Moody’s Investors Service analysts downgrading the ratings again. obligations of Rider and giving the university a “negative” outlook.
In July, the Bond Credit Rating Activity upgraded Rider’s rating from Ba1 to Ba2, citing “the university’s continued very weak operating performance, reliance on a line of credit and recent increase in l ‘leverage, largely for working capital requirements’.
A downward trend
The new bond rating marks the university’s third downgrade in four years. In 2017, Moody’s Investors Service revised Rider’s outlook to negative from stable. Then, in 2020, Moody’s downgraded the university’s revenue bonds to “junk” status, meaning the school’s bonds had a higher risk of default, and if the university borrowed more money in the future, she would probably pay higher interest rates. The latest downgrade is an even lower version of junk bond status and could make it harder and more expensive for Rider to borrow money.
The Moody’s report says the rationale for the downgrade includes declining enrollment, lagging growth in net tuition per student, and an 8% decrease in net tuition revenue over the period. tax 2016-20.
“Although the university has developed strategies to improve its operations, a turnaround, if attainable, will take several years,” the July 13 report said.
Although the new bond status may make it difficult for Rider to borrow money, the university has no plans to do so according to vice president of finance James Hartman.
Impact of COVID-19
However, an improvement in Rider’s bond rating in the near future could be difficult as the pandemic continues to bring financial hardship to the university and negatively impact enrollment.
“It is well known that the higher education landscape is changing rapidly. The global pandemic has only exacerbated existing challenges facing institutions like Rider, while creating new, unforeseen ones,” Hartman said in an email to The Rider News.
Hartman said the university lost about $27 million in room, board and ancillary revenue over the past two fiscal years due to the pandemic and spent about $2 million on COVID-19-related costs l last year to ensure the safety of faculty, staff and students.
At the fall convocation, Rider President Gregory Dell’Omo said Rider’s undergraduate enrollment fell to 76.8% last year, a steep drop from 80.3% the previous year. Dell’Omo said Rider’s total enrollment is 3,827 students, which hits Rider’s budget, but is down from the previous year’s 4,218 students.
Long-standing financial struggles
Barbara Franz, professor of political science and president of Rider’s chapter of the American Association of University Teachers, said the effects of the COVID-19 pandemic weren’t the only reason for the downgrade in Rider, and said it was the “direct result of years of mismanagement” by the current administration. She noted the failure of Rider’s attempt to sell Westminster Choir College (WCC).
“This is the second time in about a year that Rider’s bonds have been downgraded, and the third time under Chairman Dell’Omo. Long before the three downgrades of July 2021, June 2020, and November 2017, Rider had a stable bond rating…Many universities in the tri-state area have also experienced these declines in the past two semesters without an equivalent downgrade in their creditworthiness. “, Frantz said. out of all of this, it’s no surprise that Moody’s downgraded Rider’s creditworthiness.
The report also pointed to Rider’s attempt to sell WCC and the ongoing litigation surrounding it as an obstacle to improving the university’s overall financial performance.
Moody’s report details factors that could lead to a rating upgrade in the future if Rider increases enrollment, increases “net tuition,” and improves its operating margins. However, the university is expected to operate with a deficit of nearly $22 million for fiscal year 2022, Dell’Omo said during his Sept. 2 convocation speech.
Hartman said, “Rider laid out a course of action focused on enrollment growth and long-term financial stability and did so long before the pandemic hit. We have taken aggressive action over the past five years to address issues related to affordability, competition, program offerings, declining state and federal funding, student success, retention , campus facilities, and infrastructure and enrollment issues.
Hartman pointed to two new programs Rider launched last year, Lifting Barriers and Cranberry Investment, which aim to increase enrollment. The Lifting Barriers Initiative aims to help students and families overcome the significant barriers they face in obtaining a college education and successful career; it also reduced the tuition price for Rider by 22%. The Cranberry Investment guarantees undergraduate students who fulfill their responsibilities to secure employment or academic opportunities within six months of graduation.
“We continue to take bold steps to stabilize our university’s finances. The need to increase enrollment is critical, and every person at this institution should be committed to helping grow our undergraduate and graduate populations,” Hartman said. “We are confident in Rider’s unique strengths and the steps we have taken to remain financially stable while continuing to support students on their journey to achieving their personal and professional goals.”