Moody’s Affirms Samford’s Investment Grade Bond Rating
Posted by Philip Poole on 2012-12-07
Samford University's A3 investment grade bond rating has been affirmed by Moody's Investors Service, the university announced today (Dec. 7). The rating is on the 2001 and 2007 revenue bonds issued by the university, according to Harry B. Brock III, Samford's vice president for business and financial affairs.
Moody's Investors Service is a leading provider of credit ratings, research, and risk analysis. According to Moody's, A-rated bonds are judged to be upper-medium grade and are subject to low credit risk.
Moody's cited several strengths in affirming Samford's rating, including enrollment, recent financial performance and gift revenue. Samford has reported record enrollments for four consecutive years resulting in "steady net tuition revenue growth," according to Moody's.
The university has had a positive net operating performance for three consecutive fiscal years, according to Brock. The university's gift revenue also has been solid for three consecutive years, and Moody's specifically cited the ongoing annual gift from the Alabama Baptist Convention.
Brock said the university has plans to restructure its debt early in 2013, which will reduce the university's variable rate debt. There are no plans to borrow additional new money at this time, and Moody's cited this as another strength in affirming the rating.
Moody's did identify two challenges, including the university's underfunded defined benefit pension plan. Earlier this week, the university's board of trustees approved a new defined contribution retirement plan for new employees hired after Dec. 31, 2012 and previously approved a "soft-freeze" of the current defined benefit pension plan so that no new employees will enter the old plan after Dec. 31, 2012. The soft-freeze provides that there will be no change in benefits for current employees but new employees will be eligible to enter a new 403(b) plan. The action was designed to "reduce volatility, decrease liability, provide significant future cost reduction and set the stage for the elimination of risk" related to defined-benefit plans "while providing a competitive retirement plan for new employees," according to Brock.
The high level of variable rate debt cited by Moody's will be reduced with the planned debt restructuring scheduled for early next year, Brock noted.
In its report, Moody's noted that despite the identified risks, the university had not relied on its operating line of credit in three years and already was dealing with the pension plan and variable rate debt concerns.
ABOUT SAMFORD UNIVERSITY -- Samford University is a premier nationally ranked private university deeply rooted in its Christian mission. Founded in 1841, Samford is the 87th oldest institution of higher education in the United States. U.S. News & World Report ranks Samford 3rd among regional universities in the South. Samford enrolls 5,509 students from 45 states, the District of Columbia and 29 other countries in its 10 academic units: arts, arts and sciences, business, divinity, education, health professions, law, nursing, pharmacy, and public health. Samford also fields 17 NCAA Division I teams that compete in the tradition-rich Southern Conference.