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Rating Action:

Moody's downgrades Rider University, NJ to Ba2; outlook negative

13 Jul 2021

New York, July 13, 2021 -- Moody's Investors Service has downgraded Rider University's (NJ) revenue bonds to Ba2 from Ba1. The bonds were issued through the New Jersey Educational Facilities Authority. Rider University recorded approximately $89 million of debt outstanding in fiscal 2020. Rider's debt rose to approximately $110 million with its issuance of Series 2021 bonds in May 2021. The rating outlook is negative.

RATINGS RATIONALE

The rating downgrade to Ba2 from Ba1 reflects Rider University's continued very weak operating performance, reliance on a line of credit and recent increase in leverage, largely for working capital needs. The university's student demand and pricing power remain challenged, reflected in enrollment declines, lagging growth in net tuition per student and an 8% decrease in net tuition revenue over the fiscal 2016-20 period. A significant decline in room and board revenue will result in fiscal 2021 deficits in line with fiscal 2020 despite federal relief aid funding and some expense reductions measures. While the university has articulated strategies to improve operations, a turnaround, if achievable, will take multiple years. In the interim, the university will fund deficits from proceeds of its recent Series 2021 bonds (not rated) and may also need to access reserves and lines of credit depending on the duration and magnitude of deficits. Deficit operations and strategic investments have already led to a 16% decline in monthly liquidity over the past five years. Rider's recent issuance of Series 2021B bonds (not rated) elevates leverage risk with a bullet due in fiscal 2031.

The Ba2 rating remains supported by the university's moderate scale, with $131 million of revenue in fiscal 2020, as well as a mortgage on its main campus in Lawrenceville with an appraised value of over $230 million, well in excess of outstanding debt. Management's commitment to improve financial performance in the face of softened revenue growth prospects is a credit strength, although the university faces multiple constraints to doing so, including a less flexible labor environment and litigation surrounding the sale of its Westminster property in Princeton, New Jersey. The university has also articulated plans to strengthen its brand and pricing power, although success is uncertain in a highly competitive and evolving market environment.

RATING OUTLOOK

The negative outlook reflects potential for additional negative rating action if Rider is unable to stem enrollment declines and adjust its budget to be more financially sustainable.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

-Sustained improvement in strategic position, reflected in increased enrollment with corresponding material growth in net tuition and auxiliary revenue

-Significant improvement in operating margins with debt service coverage consistently over 1.5x

-Material growth in unrestricted cash and investments relative to debt and expenses

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

-Operating deficits that are either deeper or longer than those currently projected through 2024

-Significant reduction in liquidity, currently a key element providing Rider time to strengthen its challenged competitive fundamentals

-Material increase in debt without compensating increase in flexible reserves

LEGAL SECURITY

The bonds are a general obligation of the university and are secured by a Mortgage and Security Agreement under which certain real and personal property are pledged along with a pledge of tuition and fees. There is no debt service reserve fund. The recently issued Series 2021A and 2021B bonds (not rated) are on parity with outstanding bonds and do have debt service reserve funds. The Series 2021A refunded the Series 2012A bonds.

PROFILE

Rider University is a moderately sized private, not-for-profit university located in Lawrence Township (Mercer County), NJ. In fall 2020, Rider enrolled 4,205 full-time equivalent (FTE) students and in fiscal 2020 recorded operating revenue of $131 million.

METHODOLOGY

The principal methodology used in these ratings was Higher Education published in May 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1175020. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Pranav Sharma
Lead Analyst
Higher Education
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Susan Fitzgerald
Additional Contact
Higher Education
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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