The Moody’s report: An objective appraisal of the university
By Gerald D. Klein
Last week, The Rider News reported that on April 5, Moody’s, the influential risk assessment firm, downgraded Rider’s bond and overall ratings for the third time since 2020. This string of downgrades and the content of Moody’s report are significant. Because of their risk, Rider’s bonds, which have been issued to raise cash, continue to be “non-investment grade,” known as “junk bonds.”
Rider’s administration minimizes the recent downgrades, equating it to a change in someone’s personal credit score. However, the downgrades and report are more serious than that.
With this sequence of downgrades and a record of operating deficits and projected deficits through 2025, it will be difficult for Rider to locate lenders to help cover its operating expenses. The cost of borrowing will also be higher. Rider is already burdened with overall debt of $111 million, according to Moody’s report. Revealing of lender caution, a portion of this debt requires that its annual interest payment be taken directly from university revenue and securely deposited in escrow accounts.
The Moody report highlights Rider’s risky fiscal position in the short-term. It notes a “rapidly deteriorating unrestricted liquidity at just 22 monthly days (of) cash on hand for fiscal year 2022.” This means that Rider had enough cash on hand to just cover 22 days of expenses, such as utilities and salaries. Also indicating lender caution, Moody’s notes a financial covenant – and constraint – that requires Rider to maintain a minimum number of days of cash on hand, with no exceptions.
Concerning the issue of university liquidity going forward, Moody’s indicates that starting in fiscal 2024 Rider’s main source of liquidity “is expected to be a $15 million line of credit, with access to $10 million of the total of $15 million line (available) at the bank’s discretion.” Discomfitingly, this credit line expires in mid-June with its renewal not assured. Moody also reports that “returning to financial stability in the near term will prove difficult given the magnitude of projected deficits, the inflationary environment and projected flat enrollment in the fall of 2023.”
Moody’s for the first time identifies Rider’s governance structure – its board, president, and top administrators – as a “key driver”in its new rating decisions. Many currently or formerly associated with Rider have criticized the decisions and performance of its governance structure during President Gregory Dell’Omo’s tenure. Moody’s criticizes its “financial strategies and risk management, management credibility, and track record”.
Boldly and clearly stated here is that the statements of the Rider administration cannot be trusted. This must include, of course, the assertion by the administration in last week’s edition of The Rider News that Rider is now close to having an effective plan in place for a turnaround. We remember what happened to the vaunted “Our Path Forward” agenda offered up by the administration, and the relocation of Westminster to Lawrenceville. They didn’t work.