Statement on Moody’s ReportDate Released: August 8, 2016
The August 8, 2016 Moody’s report, regarding the Ba1 rating of Morehouse’ College’s $37 million Series 2007 revenue bonds, highlights the significant progress made over the past three years in stabilizing and beginning a turnaround of the College’s financial performance. Moody’s report crystalizes the critical and known challenges that lie ahead for continued improvement. The report validates the wisdom and imperative of “establishing more of a philanthropic based business model through planned growth of endowment and unrestricted giving,” as the current College leadership has done.
The Moody’s report correctly recognizes the “fiercely competitive student market” and the unique challenge confronting Morehouse as a “very narrow niche as a men’s historically black institution competing for a price sensitive population with a relatively modest endowment.” The report also accurately notes Morehouse’s “decade long trend of limited revenue growth” and “high age of plant of 19 years, pointing to the need for capital improvement.” Fortunately, the Board of Trustees and the administration have been keenly focused on these issues for several years, as reflected in the new strategic plan for the College. Morehouse continues to cherish its unique role in educating black males because the world needs more Men of Morehouse to impact the many challenges that men of color face in this world.
The Moody’s report expresses commendation for the progress made by the new Morehouse administration in addressing these challenges, stating that “new senior management has delivered on financial expectations, making some initial progress addressing key challenges.” Specifically, the report notes that “the new management team has installed stronger financial controls and expense reductions, resulting in improved operating performance in FY 2015 after multiple years of deficit annual operating performance, weak cash flow, and inability to cover debt service from operations.” The report further observes that, “FY 2016 financial results are expected to slightly exceed budgeted expectations.” Additionally, the report finds that the College has adequate financial reserves and observes that “Morehouse’s financial reserves provide the college with some financial flexibility as its management team continues to shift its business model.”
The Moody’s report explicitly affirms the wisdom of the strategic direction of the Board and the current administration, which has resulted in such significant progress, stating that “management has laid out a cogent strategy and detailed plan for FY 2017 from various constituencies.” The report similarly observes that “Morehouse’s senior leadership maintains its focus of improving its market position, returning to positive operations, and building the endowment. All key positions are now filled since the current president took office in February 2013 and the new team has made headway in enacting several new strategies and process improvements.”
Last Modified: August 10, 2016, 10:08 AM, by: Kara Walker