University receives positive financial upgrades

Katie Armstrong

The University received positive financial ratings for 2009 from Moody’s Investors Service and Standard and Poor’s, reflecting the University’s stable and optimistic financial standing.

Moody’s Investors Service upgraded the University’s long-term rating to A1 from A2, and Standard and Poor’s assigned an A long-term rating, revising the outlook to “positive” from “stable.” Moody’s also assigned an A1 rating to the University’s series 2009 bonds, while Standard and Poor’s affirmed an A rating for outstanding bonds.

The University was one of only two private universities to receive an upgrade for this year.

Moody’s Investors Service and Standard and Poor’s are renowned financial firms that provide credit ratings, research and risk analysis in the global marketplace.

Moody’s publishes market-leading credit estimations, research and commentary and assigns ratings to managed funds.

Standard and Poor’s provides the global investment community with information on stocks, mutual funds and bonds, and is known for its credit ratings, risk management and investment evaluations.

According to the respective reports from these two investment companies, the upgrades to the University’s financial ratings reflect strong operating performance, conservative fiscal management and a solid market position.

“These ratings upgrades are an affirmation of the University’s financial philosophy and discipline,” said Ken Valosky, vice president for Administration and Finance. “That philosophy is simply to make sure we live within our means, and don’t spend more than we take in.”

Ratings scales used for these upgrades are competitive investment grades involving credit risk speculation, ranging from “good grades” involving high-quality performance and reflecting high quality credit-worthiness, to “bad grades” involving high-risk trends usually resulting in default.

As they pertain to the University, positive ratings also reflect favorableness of market position, quality of fiscal operations and management and financial resources.

The positive upgrades are attributed to many factors including the University’s favorable market position as an academically competitive private institution; prudent fiscal management involving cost saving measures, resulting in operating surpluses; adequate financial resources with a conservative debt profile; and strong gift revenue compared to other A-rated establishments.

“The ratings upgrades basically mean that should the University decide to refinance its debt or issue bonds for new projects, bonds would be easier to sell,” Valosky said, speaking of the immediate issues regarding the upgrades.

Setbacks in the new ratings reflect limited revenue variety and a small endowment fund.

According to the Standard and Poor’s financial report, as of June 2009 market value of the University’s endowment had dropped $88.3 million from $355 million since May 2008, though the endowment’s market value has rebounded to approximately $290 million as of the end of September 2009.

As a mostly tuition-dependent institution with little revenue from endowments, the University must carefully manage resources.

Valosky attributed prudent fiscal management to the University’s ability to effectively manage resources.

“The University has been able to weather financial storms because it has had to practice financial discipline, due to its status as primarily tuition-dependent,” Valosky said.

According to the Standard and Poor’s financial report, the University’s good fundraising record reflects adequate financial resources.

The last comprehensive campaign in December 2007 exceeded the $300 million goal.

These ratings upgrades should be of particular interest to students, faculty and staff.

According to Valosky, the University has succeeded in keeping commitments to the campus community.

The priority to avoid layoffs and uncertainty, and especially to avoid termination of essential academic programs, resulted in unfavorable but necessary measures.

“This year, the University put into effect a hiring and salary freeze,” Valosky said. “Although these measures were not popular, they were necessary to avoid layoffs.”

It is significant, though, that the University has in no way limited academic programs or majors.

“It is important to maintain discipline in order for the academic aspects to remain strong,” Valosky said. “We still need to be cautious, though. But, in an optimistic vein, [University President Rev. Peter Donohue, O.S.A.] lifted the hiring freeze in faculty positions only, and there will be new faculty next year.”

Of particular concern for students is the availability of financial aid.

This school year, Valosky said it was necessary to overspend on financial aid, with a nine percent increase in student financial assistance.

“We were able to overspend on financial aid due to disciplined financial decisions,” Valosky added.

Additionally, the University has undertaken capital improvements, such as residence and dining hall renovations and the construction of the new Law School.

Valosky attributed prudence in fiscal management to the ability to undertake such capital projects related to the University’s campus master plan for the next one to two years.

“Our discipline and hard work pay off,” Valosky said. “Villanova University is stronger, and I think the ratings convey this.”

Valosky viewed the positive ratings upgrades as invitation for continued outside financial support of the University.

“These ratings upgrades tell supporters of Villanova that the University is a good bet financially,” he said. “The University has managed its resources well relying heavily on tuition. But in order to achieve its aspirations, the University needs the support of others.”

Valosky acknowledged the collaborative efforts of University departments in securing these desirable financial ratings.

“These ratings reflect the work of all departments, and especially the leadership of Fr. Peter Donohue,” Valosky said. “Villanova is clearly making demonstrable progress while other universities are experiencing layoffs and limits to academic programs. Villanova is where it is because of the commitment and dedication of faculty and staff.”