Thursday, October 30, 2014

Bond rate increases

Moody’s awards LU Aa3

Moody’s Investors Service upgraded Liberty University’s bond rating Monday, Sept. 9, from A1 to Aa3. According to Moody’s, an Aa3 rating is given to organizations “judged to be of high quality and very low credit risk.”

According to the report, the change reflects the university’s increases in cash reserves and operating performance, as well as its general growth, among other things.

“This momentum, if continued, will produce sufficient cash to fund transformative capital investments as well as to build reserves over time,” the report read. “The growth in revenue and cash and investments makes Liberty a true outlier in Moody’s portfolio of not-for-profit universities.”

Other factors included in the increased rating were the growth of Liberty University Online (LUO), its growing enrollment, flexible and mostly liquid assets, surpluses, and significant increases in cash and investments.

“We came to the realization over the last 25 years that significant cash reserves and endowment funding was needed to ensure that Liberty University could fulfill its mission to provide Christian education for generations to come,” Chancellor Jerry Falwell, Jr. said. “It is rewarding when rating agencies recognize Liberty’s commitment to and recent successes in building those resources for the future.”

Liberty’s Christian identity, lower cost and residential campus experience including intercollegiate athletics” were listed as positives on the residential side, but the report especially highlighted the growth of LUO.

“Prospects for sustained strength in online enrollment growth are good given institutional prowess, academic cost structure and economies of scale,” the report read.

The outlook for Liberty’s financial future was described as stable. Although the report cited the university’s current lack of diversity in revenues, Moody’s predicted that more time should allow the school to improve in that area.

“The university has limited revenue diversity, with student charges comprising 91 percent of FY 2012 revenues,” the report read. “The University’s explosive enrollment growth, diversity of academic programs and relatively low cost help mitigate the risks of concentrated revenues.”

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