Moody’s Investors Service announced on Sept. 9 that it was upgrading Liberty University’s bond rating from A1 to Aa3 with a stable outlook.
The Aa rating category is reserved by Moody’s for obligations that are judged to be of high quality and are subject to very low credit risk. Liberty’s Series 2012 taxable bonds now carry the Aa3 rating, placing the school among the 71 top rated universities in the nation by Moody's.
The latest report says the upgrade “reflects Liberty’s remarkable momentum in revenue growth and cash flow from operations. This momentum, if continued, will produce sufficient cash to fund transformative capital investments as well as to build reserves over time.”
Moody’s cited Liberty’s milestone in reaching $1 billion in net assets in fiscal year 2013. Liberty is the first evangelical Christian university and is one of the youngest American universities ever to reach this mark.
“The growth in revenue and cash and investments makes Liberty a true outlier in Moody’s portfolio of not-for-profit universities,” the report reads.
It also recognized Liberty’s strength in growing its enrollment, “supported by an extensive array of online programs with full-time equivalent enrollment of over 50,000 making it one of the largest private universities in the U.S.” The brand strength of its online program, it adds, “is built on the university’s Christian identity, lower cost, and residential campus experience including intercollegiate athletics.”
Liberty’s total enrollment now exceeds 100,000, with over 13,000 resident students and more than 90,000 studying with Liberty University Online.
“Liberty achieved another remarkable year of revenue growth (up 13 percent to $728 million) as it continues to attract new online students and slowly build core residential programs,” the report says.
It also outlined recent program expansion, including Liberty’s new College of Osteopathic Medicine, which recently received provisional accreditation.
Liberty is in the process of replacing many structures on its campus that had become obsolete and is investing hundreds of millions of dollars in a multi-year campus transformation. Parts of the campus are being completely rebuilt. While the capital expansion is grand in scale, the university has kept its commitment to building reserves for the future its first financial priority.
“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. It is rewarding when rating agencies recognize Liberty’s commitment to and recent successes in building those resources for the future,” said President Jerry Falwell, Jr. “Going through the ratings process over the last three years has been a real learning experience for our management team. When we met with Moody’s last month in Manhattan, it was gratifying to hear from them how they had noticed that Liberty had reached certain financial milestones about one year earlier than we had predicted when we met with the same Moody’s folks in 2010.”
Bond ratings measure an institution’s financial management and ability to pay back borrowed money on time and in full. Liberty marked its initial public bond offering when it issued $120 million worth of tax-exempt education facilities bonds in December 2010. In January 2012, Liberty announced its second IPO, this time in the corporate bond market selling $100 million of taxable bonds.
Last year, Liberty received another superior credit rating, “AA,” from Standard & Poor’s on its tax-exempt bonds. That credit rating placed Liberty in a group of 78 universities with the highest credit ratings in the nation.
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