By Zack Sampson, News Staff
Ahead of Northeastern’s expected bond sale at the end of the month, Moody’s Investors Service said in a credit rating that the university has a stable outlook for its financial future but relies narrowly on student charges for revenue.
The university is expected to sell $50.9 million in revenue bonds on August 27, according to a statement from Moody’s. Moody’s assigned an A2 rating to these bonds.This represents a mid-level A rating; the highest rating Moody’s offers is AAA.
Moody’s estimated Northeastern’s pro-forma debt at $740.3 million. A Northeastern spokeswoman declined to disclose what the proceeds from the bond sale will be used for.
“The A2 rating reflects the university’s role as an urban university with diverse degree offerings, growing net tuition revenues, and strong operating performance,” the investors service wrote in its statement.
Specifically, Moody’s listed a few of Northeastern’s strengths, including the increasing desire of students to attend the school. The service cited a couple student demand metrics, including matriculation rates. It praised Northeastern’s 20.7 percent freshmen Fall 2011 matriculation rate, or the number of freshmen who choose to attend Northeastern after admittance.
“One of the best indicators of the university’s strength is the fact that we continue to see a record-breaking number of applicants each year,” Renata Nyul, the university spokeswoman, said in an email to The News. “This is particularly important at a university that is largely tuition-dependent.”
But Moody’s also listed that tuition dependence as a potential challenge for Northeastern.
“Northeastern’s net tuition per student is high at over $25,000 per year, and the university could face pressure on tuition increases and its financial aid budget in light of families’ increased price sensitivity,” the investors service wrote.
It noted that nearly 80 percent of Northeastern’s operating revenue in the 2011 fiscal year came from student charges, and encouraged the school to diversify its revenue stream.
Moody’s said Northeastern’s fundraising history is limited compared to other universities too, but added that the school is clearly trying to improve its fundraising efforts as part of a capital campaign.
The bond rating could go down if there was a decline in student demand or operating performance, according to Moody’s. It also could go up if the university sees increases in fundraising and maintains its growth in student demand.
