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Moody's awards St. Olaf higher grade
August 17, 2010
Moody’s Investors Service has announced its most recent evaluation of the fiscal soundness of St. Olaf, upgrading the college from its previous A2 bond rating to A1. According to Moody’s, the upgrade reflects “uncommonly strong cash flow margins, healthy liquidity, a reduction in variable rate debt, and stability in market positioning.” Only two other Minnesota private colleges, Carleton and Macalester, currently have credit ratings at or above A1.
|President David R. Anderson '74|
“The action by Moody’s represents yet another external validation of St. Olaf College’s many strengths,” said President David R. Anderson ‘74. “A strong Moody’s bond rating affirms much more than just the college’s financial stability; it is a testament to the fact that St. Olaf continues to prosper and excel in difficult times.”
Founded in 1909, Moody’s is one of the premier credit rating agencies in the world, providing analyses of the credit-worthiness of commercial, nonprofit, and public entities. Its ratings guide investors and financial markets as to the risks of purchasing bonds and other debt instruments.
The Moody's Higher Education Ratings Team maintains credit ratings on more than 900 colleges and universities. In evaluating colleges, the team looks at a wide variety of factors such as debt load, endowment returns, net tuition income, physical assets, attractiveness to prospective students, and the level of alumni and donor support. Within the private college and university sector, Moody's median rating is A3.
A better bond rating means that there is less potential risk for investors holding St. Olaf bonds. As a result, St. Olaf will enjoy stronger demand for its bond issuances and the cost to the college of borrowing money will be lower than it otherwise would be.
Forbes magazine reported this month that so far this year Moody’s “has handed out many times more downgrades than upgrades” for college and universities with public debt. As of August, only four other schools have received rating upgrades this year, contrasting with “about two dozen that have been on the receiving end of a downgrade.” This follows a trend of recent years, where very few colleges and universities have had their credit rating upgraded.