Credit rating agency warns Simmons about debt
“It’s a pretty big project,” said Pranav Sharma, the Moody’s analyst who reviewed Simmons’ financial information. “The flexibility Simmons had prior to this project is reduced. “
Moody’s also reported other concerns for the university of 6,000 students. The bet Simmons made several years ago to increase enrollment and income by investing in online education is starting to ease, as other universities dive into the market, the rating agency said. .
After the school quickly expanded its online graduate programs in nursing and social work, overall enrollments at Simmons fell 4% last year, mostly in online programs. The university attracted more freshmen, but also had to offer more discounts on tuition fees to enroll them, Moody’s noted.
“Failure to stabilize enrollment and increase net tuition fee income would jeopardize the university’s ability to cope with its relatively high debt load,” Moody’s noted in its credit opinion.
It is not uncommon for rating agencies to issue negative outlooks for universities before launching large projects requiring heavy borrowing, said Helen G. Drinan, who is ending her 12-year term as Simmons president. in June.
The negative outlook is “negligible” for the university’s plans, Drinan said, adding that she was optimistic about Simmons’ financial health.
“I don’t see anything on the horizon that suggests things are going to slow down,” she said.
The sale of $ 77 million bonds will allow Simmons to relocate and modernize its science center, a project expected to be completed in the fall of 2022, Drinan said.
Eventually, Simmons plans to raze the current science center and build dormitories and classrooms there, as part of an initiative to consolidate the university’s Brookline Avenue operations on its main campus, A she declared.
Construction of the residential tower will be a separate project planned after 2022, which Simmons officials expect to fund through a land swap with a private developer, Drinan said.
This long-term consolidation plan is an effort to ensure Simmons remains competitive and financially healthy, she said.
But she recognizes that the university faces headwinds in online education and undergraduate enrollment. Many small private colleges, especially in New England, have closed or merged in recent years due to financial issues and declining numbers of college age students.
Simmons is revising the price of its online programs and may lower the prices to ensure they remain affordable for students.
“We’re going to grow up, obviously slower than we’ve been doing over the past four years,” Drinan said of the school’s online programs. “The key for us is to learn, to compete. … This is not a gentleman’s game; it’s a real head-to-head competition.
The university has also started recruiting international undergraduate students for the first time to offset any decline in enrollment in the United States, Drinan said.
Drinan said she has spent the past few months trying to ensure that her successor, Lynn Perry Wooten, who is currently Dean of Cornell University, has a smooth financial transition.
“We are taking an extremely prudent approach to the budget,” Drinan said.
The higher education market is changing rapidly and liberal arts schools that rely heavily on student tuition fees are in dire straits, said Susan Fitzgerald, associate managing director at Moody’s.
They need to have the most modern facilities to attract students and beat their competition, but also risk getting into too much debt, Fitzgerald said.
Institutions like Simmons deploy a variety of strategies to stay relevant.
“We’ll see how these strategies play out,” Fitzgerald said.