Moody's, Standard & Poor's give Rowan high credit ratingsJune 05, 2013
As Rowan University undergoes a period of profound transformation, two of the nation’s top credit-rating agencies have given the institution high marks.
The two agencies recently reviewed the University’s overall indebtedness in preparation for the transfer of the University of Medicine & Dentistry of New Jersey School of Osteopathic Medicine (UMDNJ-SOM) and its $57 million of debt to Rowan on July 1.
Moody’s Investors Service gave Rowan a rating of A2 with a stable outlook, which is an increase from the negative outlook Rowan most recently had. Standard & Poor’s Ratings Services maintained the University’s A+ rating with a stable outlook.
“We are very pleased with the confidence Moody’s and Standard & Poor’s have in our plans for the transfer of SOM and the transformation of our institution,” said Rowan President Dr. Ali Houshmand. “The positive ratings will enable the University to obtain slightly better rates on the sale of bonds and affirm that Rowan is a good investment.”
The New Jersey Medical and Health Sciences Education Restructuring Act of 2012 dissolves UMDNJ on July 1 and transfers SOM to Rowan, and the balance of UMDNJ to Rutgers University.With the addition of SOM, an osteopathic medical school located in Stratford, Rowan becomes only the second institution in the nation to offer both D.O. and M.D. medical degree programs. Rowan accepted its first class of students inCooper Medical School of Rowan University in August 2012.
The Restructuring Act also designates Rowan as New Jersey’s second comprehensive state research university and partners the institution with Rutgers University to create a College of Health Sciences in the City of Camden.
In assessing the University, Moody’s report said: “The stable outlook reflects expectations of management’s successful oversight and integration of SOM and commensurate growth of Cooper Medical School (of Rowan University); steady, strong student demand with enrollment growth driving increased revenues; maintenance of healthy operating cash flow to adequately service debt; and continued slow growth of balance sheet resources.”
The report from Standard & Poor’s noted that its A+ rating reflects “firm student demand with competitive acceptance rates, favorable and improving matriculation rates and student quality; strong financial performance with consistent operating surpluses recorded on a full accrual basis; increasing financial support from the State of New Jersey; modest-but-adequate financial resources; and strong annual support from the Rowan University Foundation.”
Standard & Poor’s further stated: “While there may be a slight increase in Rowan’s overall risk profile in the short term as it assimilates the SOM acquisition into its business model, we believe Rowan’s capable management team has the talent and resources necessary to execute this transition relatively seamlessly and thus mitigate this risk.”
Rowan’s expansion plans also include a massive construction initiative that will expend more than $170 million on new buildings for its Colleges of Business and Engineering, renovations to the First National Bank of Camden for the expansion of its programs in Camden, and making critical upgrades of facilities on its Glassboro campus to enable the University to double enrollment to 24,000 students by 2023. The University tentatively has been awarded more than $117 million from the state for these projects through the Building Our Future Bond Act and other funding sources.
University officials say that the added debt will not impact tuition. The University has committed to keeping undergraduate tuition and fee increases for academic year 2013/14 to no greater than the rate of inflation, which is 2.1 percent. The Rowan Board of Trustees is expected to vote on increases at its June 12 meeting.