Moody’s Investors Service Upgrades Bowdoin’s Bond Rating
Story posted May 31, 2001
Moody’s Investors Service has upgraded Bowdoin College’s long-term debt rating to Aa2 with a stable outlook, from Aa3 with a positive outlook. This upgrade is an indication of Bowdoin’s continued and improved financial well-being.
Moody’s ratings range from a high of Aaa to a low of C. Since 1990, Bowdoin’s bond rating has been upgraded twice, from A1 to the present Aa2. An examination of the rating categories around Bowdoin’s Aa2 with sample institutions provides a comparative perspective of its perceived financial condition and creditworthiness.
Aaa – Harvard, Williams
Aa1 – Amherst, Brown
Aa2 – Bowdoin, Carleton, Johns Hopkins
Aa3 – Boston College, Middlebury
A1 – Colgate, University of Pennsylvania
A2 – Connecticut College, Georgetown
In addition, an Aa2 rating is being applied on an underlying basis to the Maine Health and Higher Educational Facilities Authority’s Series 2001C bonds, reflecting Bowdoin’s fundamental credit strengths that are enhanced by other structural characteristics of the issue, such as a moral obligation pledge by the state.
The Aa2 rating also reflects Bowdoin’s underlying payment obligation on an additional $44 million of debt issued through the Authority. The College will use bond proceeds to refund outstanding Series 1991 bonds as well as to provide $8 million for new construction and renovation (including $6 million to rehabilitate three former fraternity houses).
According to Moody’s the Aa2 rating reflects:
Bowdoin’s exceptionally strong student demand as one of the top liberal arts colleges in the country. With a nearly 9% increase in applications for the first year class entering in the fall of 2001, the College has become even more selective. Bowdoin attracts a national pool of students and competes with some of the most reputable liberal arts colleges in the nation.
Significant resource levels, bolstered by healthy fundraising, with limited additional medium-term borrowing plans. Bowdoin’s proven ability to attract private philanthropic support and to demonstrate prudent financial management anticipate further growth in the College’s already healthy financial resource base. Private support remains strong, and this year’s return on the endowment, which is relatively diversified, was not as low as that experienced by peer institutions. Expendable financial reserves would cover nearly 4.7 years of operations, and the College has not identified any additional borrowing plans over the intermediate term.
Prudent fiscal management ensuring longer term stability. Although the College has had fairly significant growth in its expense base in recent years reflecting investment in several strategic initiatives, management is taking appropriate steps to ensure operating balance over the long term. This includes a long-range financial plan, sustainable endowment spending rate of less than 3.5% of current market value, and potential trimming of certain areas of the budget next year.
Kent Chabotar, Bowdoin’s Vice President for Finance and Administration & Treasurer, ranks excellent admissions statistics, significant initiatives in the academic program and residential life, nine consecutive balanced budgets, high levels of annual and capital giving, and great confidence engendered by interviews with President Robert Edwards and President-Elect Barry Mills as major factors in Moody’s upgrade as well.
Chabotar notes that the practical effects of the upgrade include slightly lower borrowing costs, higher investor confidence, and a public confirmation that the College’s finances are in good shape.
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