Moody Investors Service affirmed ACU’s A3 ratings on the university’s revenue bonds.
“Moody’s is a financial rating agency, informing the public of the financial health, stability and upcoming financial plans of organizations with publicly held debt,” said Kevin Campbell, senior vice president of operations. “Universities can work with private companies to secure financing (banks) or can go to the bond market (public).”
According to Moody, this reflects the university’s “good strategic positioning as a moderately sized faith-based university in demographically strong Texas, bolstered by sizable financial reserves and liquidity relative to peers, with manageable financial leverage.”
This is based on ACU’s cash flow of 9.4 percent in the 2019 fiscal based on the growth of tuition revenue and net tuition per student being the strongest in a decade and the university’s plans to invest and develop ACU owned land further. The cash flow was also heightened by ACU’s increasing number of online students.
Despite this the report describes ACU’s cash flow as “weaker than rated peers.” Moody also describes ACU’s “internally-designated endowment funds” for building and development and “heightened oversight” should be used when the money is spent to make sure that cost controls are maintained.
“Some universities will fail to exist into the future due to their lack of financial resources and inability to attract students,” Campbell said. “While Moody’s contains helpful information regarding the financial health of an organization, its primary audience is investors. Nonetheless, ACU students should be proud that another (US News in the fall semester) external group who has broad insight into the higher education market is affirming the positive momentum we’ve been able to create.”
Moody said that the university could receive better ratings if it has “substantially stronger debt service coverage” and the university continues its current growth.
The full report can be found at https://m.moodys.com/research/Moodys-affirms-Abilene-Christian-Universitys-TX-A3-outlook-stable–PR_906274434