News Column

Witt's credit rating remains negative

July 8, 2014

By Tiffany Y. Latta, Dayton Daily News, Ohio



July 08--A top credit rating firm has again given Wittenberg University a negative financial outlook and continues to view the school as a high credit risk for investors.

Moody's recently affirmed the university's B1 rating with a negative outlook on $35 million of debt issued through the Ohio Higher Educational Facility Commission.

A B1 rating is below investment grade, is considered speculative and is subject to high credit risk, according to Moody's.

University officials had been hopeful Moody's Investors Service's 2014 report would show an improvement in its outlook, rating or both after reaching its enrollment goal for the second year in a row and creating a detailed plan to cut a total of $4.5 million by 2017.

But Rob Munson, vice president for finance and administration, said university officials are not disappointed by the result.

"As our president has repeatedly said, if distance is measured in miles traveled, we have come quite a distance. I actually see this rating as a positive as there was no further downgrade," Munson said.

Last year, Moody's downgraded the university's bond rating from Ba2 to B1 with a negative outlook. The credit rating agency in its 2013 review cited stagnant enrollment growth and aggressive tuition discounting.

In the 2014 report, Moody's cited enrollment declines, tuition discounting, thin financial resources and cash flow, and aging campus structures that would require upgrades in the future.

The report, however, did recognize that Wittenberg President Laurie Joyner is leading efforts to stabilize the university's operations and improve its financial position and noted that the university's operations showed "modest" improvement in 2013, following expense reductions.

"Wittenberg University's negative outlook reflects expected weak performance over the next two years as the university's board and management work to stabilize operations through aggressive expense oversight and enrollment management in the face of stagnant to declining tuition revenues and continued liquidity pressures," according to Moody's.

Munson said the university made inroads in changing its financial outlook over the last year, but has not yet met all of its goals.

"The analysts look at many different indicators, including prior fiscal year results, a projection of the current year and projections for the next fiscal year. While we experienced many positive improvements, we still have some distance to travel," he said.

The report noted plans by university administrators for about $5 million in recurring expense cuts over the next five years. It also recognized that the board froze endowment spending at $5.7 million in 2013, compared to $6.2 million in 2012.

"The actions taken since the president joined in (fiscal year) 2012 resulted in a halt in the deterioration in operations and liquidity. Momentum from the board-directed initiatives will take at least a few years to fully produce positive effects," according to Moody's.

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(c)2014 the Dayton Daily News (Dayton, Ohio)

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Source: Dayton Daily News (OH)


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