NEW YORK — Fitch Ratings Ltd. has assigned a rating of “BBB” to $58 million R.I. Health and Educational Building Corp. higher education facilities revenue refunding bonds, issued on behalf of Roger Williams University.
Fitch projects that the series 2013 bonds will be sold via negotiation during the week of June 24. Proceeds from the bond sales will go toward refunding the series 2003 and 2008B bonds and to pay issuance costs.
Categories “AAA” to “BBB” constitute what many consider “investment grade,” or relatively low- to moderate-credit risk. The “BBB” rating for Roger Williams indicates “consistent generation on a full accrual basis and adequate financial resources relative to operating expenses and long-term debt,” according to Fitch, which said it believes these characteristics will partially balance out “concerns regarding a high debt burden, very high reliance on student-generated revenues and limited fundraising history.”
Ratings for the Roger Williams’ revenue refunding bonds are expected to remain stable, said the Fitch Report. The key rating drivers are stable credit characteristics, significant revenue concentration, enrollment-focused initiative and high debt burden.
In fiscal 2012, student-generated revenues constituted 93.8 percent of the university’s total unrestricted operating revenues. Although such a high percentage leaves Roger Williams vulnerable to shifts in student headcount and demand patterns, Fitch said it observed that high dependency on student-generated revenues is not uncommon among higher education institutions.
Also, Roger Williams has retained a stable headcount; for fall 2012, it totaled 4,769 students, excluding the law school, making for the second highest count in the past five years. Current deposits for fall 2013 are greater than those of 2012, indicating that overall demand trends are positive, said Fitch Ratings.
The university has increased endowment allocation to alternative investments from approximately 23 percent to 28 percent as of fiscal year end 2012, a move which Fitch Ratings has judged “moderately aggressive” for the rating category.
The university is also expected to benefit from its enrollment-focused initiative. RWU has a weak undergraduate matriculation rate, which came in at 15.5 percent for fall 2012. With the goal of reversing these low enrollment trends the university initiated the “Affordable Excellence” program to help control ballooning educational costs.
The program seeks to implement a slight increase in discounting, a tuition freeze and guaranteed tuition rate for incoming students in fall 2013.
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