Moody’s Affirms Yeshiva University B3 Junk Rating
On Monday, February 9, the Moody’s Investors Service affirmed Yeshiva University’s B3 rating on its 2009 and 2011a bonds, with a negative outlook.
Moody’s first downgraded Yeshiva to B3 in March 2014. Since then, Yeshiva implemented the “Roadmap for Sustainable Excellence,” sold Einstein, and instituted numerous cost-cutting initiatives throughout the University. Indeed, upon the recent completion of the Einstein deal, sentiment appeared to change on campus, with many believing that Yeshiva’s financial outlook had finally improved and that it had passed through the proverbial storm.
Despite these expectations, Moody’s recent report affirmed its 2014 B3 junk rating. A B3 rating reflects a non-investment, speculative grade, with high credit risk. This rating significantly affects Yeshiva’s ability to borrow more money.
Moody’s noted that “despite the transfer of financial responsibility for its (Yeshiva’s) medical school,” they still expect “deep operating deficits” over the next few years. Compounding this issue, they cited the “limited pricing flexibility with its core market and a high cost educational delivery model.” These combined issues may portend more cuts across the University.
The negative outlook of this B3 rating reflects the possibility that Yeshiva will deplete its extremely limited liquidity without managing to sell additional real estate. Moody’s cited that substantial improvements in “unrestricted liquidity” along with progress towards reducing budget deficits could lead to a rating upgrade, while failure to accomplish these tasks could result in a further downgrade.
Though Yeshiva engaged in soul-searching budget cuts for most of 2015, Moody’s recent credit rating may signal that financial streamlining is still a long road ahead, and financial woes may continue haunting the university even into the tenure of its next president.
See the full report here