S&P: Boston University's 2016BB Bonds Rated 'A+'
We also affirmed our 'AA+/A-1' and 'AA+/A-1+' joint criteria ratings where the long-term component of the dual rating is based jointly (assuming low correlation) on the ratings on the obligor and the letter of credit (LOC) providers, and the short-term component of the dual rating is based solely on the rating on the bank.
In November 2015, we raised the rating to 'A+' from 'A' based on improvement in financial resources and sustained strengths in operations and demand. "We assess the enterprise profile as extremely strong characterized by excellent market position and demand measures and what we consider solid management and governance policies and practices," said S&P Global Ratings analyst Jessica Goldman. "We assess the financial profile as strong with a history of positive operating results somewhat offset by balance sheet measures that are sufficient for the rating but below median levels." Combined we believe these factors lead to an indicative standalone credit profile of 'aa-'. As our criteria indicate, the final rating can be within one notch of the indicative credit level. In our opinion, the 'A+' rating better reflects the financial resource levels that are below similarly rated peers. While we expect that financial resources will improve given the successful capital campaign, there is some incremental debt with the series 2016 issuance ($125 million new money), which adds to the already high overall outstanding debt.
The stable outlook reflects our expectation that BU will continue generating solid operating surpluses, maintain current enrollment levels and demand metrics, and continue to grow its financial resources relative to operating expenses and debt with limited additional new debt issuance after the 2016 transaction.
We could consider a positive outlook or higher rating if BU improves financial metrics such that resources relative to debt and operating expenses are more in line with a higher rating while maintaining its solid enterprise profile.
We could consider lowering the rating if BU issues significant additional debt that materially weakens financial resource ratios, if operating margins are severely compressed, or if demand softens and enrollment declines materially.