S&P: Missouri Southern State University Revenue Bond Rating Lowered To 'BBB+' On Declining Available Resources
"We lowered the rating based on the application of our 'Not-for-Profit Public and Private Colleges and Universities Methodology,' published on Jan. 6, 2016, and as a result of declining available resources ratios that we believe are consistent with a lower rating," said S&P Global Ratings analyst Charlene Butterfield. The outlook for all ratings is stable.
We assessed MSSU's enterprise profile as adequate characterized by stable retention, and rebounding enrollment following a devastating tornado in May 2011, offset by what we consider weak graduation rates and limited fundraising history. We assessed MSSU's financial profile as adequate characterized by persistent full-accrual operating deficits that have diminished in fiscal 2015, and low available resources ratios for the rating category, offset by a manageable debt burden and consistent state support that we expect to increase during the next few years.
The rating reflects our assessment of MSSU's continued solid support from Missouri, representing the second-largest portion of university revenue; manageable maximum annual debt service (MADS) burden in fiscal 2015; enrollment growth for fall 2015 that we expect to continue into fall 2016; and lack of additional debt plans. Offsetting these strengths are MSSU's persistent full-accrual operating deficits through fiscal 2015, though management expects improved results in fiscal 2016; increasing tuition discount rate and negative net tuition revenue growth; and low available resources ratios for fiscal 2015.
The stable outlook reflects our expectation that the university's operating performance will improve during the next two years and approach balance on a full accrual basis. We also expect that enrollment will be sustained at current levels or higher, and that state support will remain solid while available resources will not deteriorate from current levels.
We could consider a lower rating during the next two years if MSSU's enrollment declines, or if operating deficits escalate, or if available resources ratios decrease from current levels.
In our view, a higher rating during the next two years is unlikely given the low financial resources.
Missouri Southern State University, located in the southwest corner of the state in Joplin, is a state-supported, comprehensive university offering bachelor's and selected master's degrees.