Moody’s negative view

By Casey Gale

Rider University is among the many higher-education institutions across the country that have had their financial outlook revised from stable to negative by Moody’s Investors Service for 2013.

The revision reflects that after a decline in enrollment for the past four years, Moody’s Investors Service expects it will continue to drop. If this causes operating performance to deteriorate, Moody’s reports that it could result in the use of financial reserves for the fiscal year 2014. Continued student-demand challenges and a weaker operating performance may limit financial resource growth relative to Rider’s peers, as financial resources have not yet recovered from the financial crisis, Moody’s believes.

At the time of the report, Rider’s bond rating was unchanged from its 2012 rating of Baa1, the eighth highest rating of 21 in Moody’s Long-term Corporate Obligation Rating, according to However, the revision from stable to negative indicates that it is suspected that the credit rating will change in the medium term.

“Generally, the lower the credit rating, the higher the interest rate a borrower will pay on newly issued debt,” explained Julie Karns, treasurer and vice president for finance.

“There is not a precise, known relationship between a ratings change and the interest rate paid, but the cumulative cost of increased interest rates can be meaningful.”

Karns reported that there are no plans for Rider to borrow money within the next few years.

The report explains that with more than half of the school’s full-time equivalent workforce unionized, the university has less flexibility to make meaningful expense cuts.

Dr. Jeffrey Halpern of the American Association of University Professors (AAUP) feels as though the report is simplifying a complicated matter.

“We feel that more investigation is necessary to understand why the administration missed their enrollment goal and, notably, why expenses are increasing,” he said.

“In order to better understand Rider’s financial situation, the AAUP has hired an outside consultant to review the university’s audited statements over the last three years.”

The report, which is expected to be complete early in the new year, will be shared with the Rider community when finished, Halpern said.

Though some administrators say the university is currently facing a financial struggle, Moody’s also noted the strengths of the school.
Rider’s conservative budgeting has resulted in a positive operating performance in the past, despite limited tuition revenue growth.

According to the report, the university’s financial future should be looking up for new students: By the end of fiscal year 2018, it is projected that the university will have paid off 40% of existing principal on its loans with no interim borrowing plans.

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