2016 S&P Global Ratings Affirmed Morehouse College’s A-Bond RatingDate Released: August 18, 2016
Report commends Morehouse for stabilizing its senior-level management team and aptly observes that strengthening enrollment is one of the top priorities of the management team.
The August 17, 2016 S&P Global Ratings affirmed the A- rating on the Fulton County Development Authority bonds for Morehouse College. In affirming Morehouse’s A- rating, the S & P report reflects the progress that the College is making in addressing the significant challenges of recent years. The factors specified as the rationale for the affirmation, include an assessment of “Morehouse College’s enterprise profile as strong characterized by good matriculation, solid geographic diversity, and early indications of a stabilizing enrollment base.” Additional factors cited are S & P’s assessment of Morehouse’s “financial profile as adequate” and “the college’s conservative debt portfolio and good balance sheet resources.” S & P summarizes its rationale for the A- rating by stating “in our opinion the A- rating on the college’s bonds better reflects Morehouse’s available resources for the rating category and the expectation the college’s operations will continue toward break-even performance on a full accrual basis.”
In assessing the market challenges confronting Morehouse, the S & P report accurately notes that “Morehouse has faced enrollment pressure in recent years.” Furthermore, the report aptly observes that “strengthening enrollment is one of the top priorities of the management team. It is in the process of improving its prospective student outreach, increasing its marketing and adding resources to better target and recruit prospective students. As a result, fall 2015 enrollment improved moderately with FTE students increasing to 2,117, up 2.7% from the prior year. Management is projecting enrollment to remain stable over the next three years.”
The S & P report commends Morehouse for stabilizing its senior-level management team, which has facilitated the progress noted. Specifically, the report observes that “the new management team has been in place for about three years and is currently in the process of implementing improvements to focus on enrollment, and to implement a strategic plan. We believe management’s efforts to address challenges at the college are positive.”
The S & P report further commends Morehouse for making the tough decisions necessary to improve its financial performance. The report states that during the past two years, management has demonstrated an ability and willingness to cut expenses to address revenue declines caused by lower enrollment.” The report adds that “per management’s three-year forecast, operations are expected to improve slightly over time and reach break-even results on a full accrual basis in fiscal 2017.”
In assessing Morehouse’s available resources, the S &P report finds that “Morehouse has above-average financial resources which have provided some flexibility during this period of declining enrollment and operational pressure.” The report finds further that, as of June 30, 2015, the College’s expendable resources were 80% of adjusted operating expenses and 145.8% of debt. Significantly, the report concludes that “in our opinion, the college’s ratios are good compared with A category peer institutions.”
The S & P report similarly commends Morehouse on its investment portfolio allocation of 53% equities, 34% cash and fixed income, 12% alternatives, and 1% real estate. The report notes that “management has made changes over the past year in its asset allocation and reduced the college’s portfolio risk which we view positively.”
The S & P report concludes with a finding that Morehouse has positioned itself to prudently service its relatively limited debt. Specifically, the report observes, “[w]e consider this level of debt to be very manageable, especially because the outstanding debt is less than half of net property, plant and equipment.”
The S & P rating affirming Morehouse’s A- rating is a clear validation of the significant progress that the current leadership of the College has made in addressing the substantial challenges encountered during recent times. It also highlights the imperative for the entire Morehouse community to remain steadfast in our collective quest to fully realize the Morehouse of the World of our Dreams.
Last Modified: August 19, 2016, 14:08 PM, by: Kara Walker